NEW YORK (TheStreet) -- Ciena (CIEN) - Get Report shares closed trading up 1.68% to $20.53 on Tuesday after Verizon (VZ) - Get Report announced that it was tapping the communications networking equipment provider as a partner in its plans to incorporate 100G optical technology into its U.S. network.
Verizon wants to modernize its optical network by replacing its legacy infrastructure with packet-based optical transport capabilities.
Verizon said that it will be using Ciena's 100G CDC ROADMs to "advance and scale its network while maintaining existing services and reducing service-activation times as well as network operation and maintenance costs."
Analysts at Stifel believe that the value of the contract opportunity could be worth $100 million in 2016 revenue while analysts at Cowen believe that between Ciena and Cisco (CSCO) - Get Report, who also won a piece of the contract, could see between $200 million and $300 million over two years.
TheStreet Ratings team rates CIENA CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CIENA CORP (CIEN) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 159.57% to $22.14 million when compared to the same quarter last year. In addition, CIENA CORP has also vastly surpassed the industry average cash flow growth rate of -19.80%.
- 46.07% is the gross profit margin for CIENA CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.54% is in-line with the industry average.
- CIENA CORP's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CIENA CORP continued to lose money by earning -$0.39 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings ($1.11 versus -$0.39).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CIEN has underperformed the S&P 500 Index, declining 12.79% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has decreased by 17.8% when compared to the same quarter one year ago, dropping from -$15.94 million to -$18.78 million.
- You can view the full analysis from the report here: CIEN Ratings Report
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