This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Don't Overreact to Ciena's Guidance

NEW YORK ( TheStreet) -- Shares of optical networking giant Ciena (CIEN - Get Report) declined more than 3% Thursday even though the company beat fiscal first-quarter estimates for both revenue and earnings.

The problem, however, is that the Street absolutely hated management's second-quarter guidance. It's an overreaction. Ciena's management didn't say anything we haven't heard from Cisco (CSCO) and Juniper (JNPR). And it's not as if Ciena had overpromised in the quarter just completed. Guidance was considered weak when it was issued in December.

The company specializes in broadband, data networking and optical equipment services, which means that it's main customers included (among others) are Verizon (VZ) and AT&T (T). If you follow the telecom sector, you know it's these companies that have under-invested in infrastructure for the past couple of years.

This occurred while analysts predicted strong capacity upgrades that never came. And even though there has been some modest improvement in carrier spending, it's been anything but robust, not just in the U.S. but also abroad.

Cisco's CEO John Chambers has made this clear on several occasions. Somehow it has become Ciena's fault for not promising better days. We have no idea when spending will return to robust levels.

Here's what we do know; although the good times have yet to arrive, Ciena is well positioned to steal and/or preserve market share when carriers can no longer starve themselves. With first-quarter revenue surging 18% year-over-year, management continues to do an exceptional job differentiating Ciena's products and services.

Ahead of the report, there were concerns that Verizon's deal with Vodafone (VOD) would impact the strength of Ciena's relationship with Verizon. It was said that Verizon would no longer "need" Ciena. This, too, was overblown. And with adjusted earnings climbing 8% year over year, the Street has to now explain how it could have underestimated Ciena's performance 116%. The Street expected 6 cents per share. Ciena delivered 13 cents.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CIEN $16.63 -4.40%
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
TSLA $247.54 -1.60%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs