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It wasn't a popular call. But although carrier spending had not fully rebounded, management still figured out ways to get revenue and free-cash-flow growth.
To that end, given Ciena's industry-leading position in optical telecommunications equipment, I felt there was (at least) 15% upside to be had in the stock regardless of whether the likes of
Verizon(VZ - Get Report) and
AT&T(T - Get Report) decided to spend.
Not to mention that Ciena was coming off consecutive quarters in which the company beat estimates and raised guidance. Since the June article, the stock has soared 22%, including a 52-week high of $24.61. And following yet another beat-and-raise quarter, there's no question that more gains are on the way.
On many levels, the Ciena's turnaround is pretty remarkable. With the
recent moves made by
Alcatel-Lucent(ALU), questions were raised as to whether Ciena, which also competes with bigger rivals like
Cisco(CSCO - Get Report) and
Juniper(JNPR - Get Report), could ever survive the
weak carrier-spending environment.
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Now, with revenue growing 14% year-over year and 19% sequentially, these concerns have been put to rest. Equally impressive, for the second consecutive quarter, Ciena showed tremendous growth in packet networking, which was up 23% year over year and a stunning 104% sequentially.
Now, with virtually no one reporting on this performance, it still seems as if the Street is unwilling to give Ciena its proper credit.
You can be unimpressed if you like. But let's not forget, that although Cisco did report a strong quarter several weeks ago, Cisco got hammered for issuing
softer-than-expected guidance .
So truth be told, although I was in the glass-half-full camp in the telecom sector, there were also reasons for caution heading into Ciena's report.
Essentially, this performance, which also includes a 8% year-over-year improvement in non-GAAP gross margin, validates
what I've been saying about the credibility that Ciena has earned. The fear of Cisco is always a concern, which is what has kept investors at bay.