I'm not at all suggesting that anyone should jump into this stock and pretend that there are no risks. One example of drawbacks to the company's growth is that it's strongly predicated on carriers choosing to not starve themselves and instead to upgrade their networking equipment.
Even so, what I do believe is that we now have more than enough data on Ciena to appreciate that the worst is over. In that process, I've become a believer in the company's management.
As skeptical as I am at times, having faith in management is not something that comes easily for me. However, that Ciena's management continues to fight off pricing pressure and grow margin amid a tough spending climate is impressive.
I've said it before and I'll say it again, the fact that Ciena has remained independent for this long is surprising. Given the company's ability to leverage its technological advantages to grow, while showing a willingness to innovate and yet be profitable, makes Ciena an attractive acquisition candidate.(ORCL) was willing to put up $2.1 billion to pick-off Acme Packet (APKT). An acquisition may not happen when we expect, but I believe this strong quarter now places Ciena in the spotlight where it belongs, especially given the company's strong margin performance. What this tells me is that management has shifted its focus towards returning value to shareholders. And given the resurgence in carrier spending, there is no reason to expect that this level of performance will end any time soon. With shares of Ciena trading at around $24, on the basis of continued free cash flow and revenue growth there's strong support for the stock to reach $30. This suggests that the stock remains undervalued by at least 25%. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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