Ciena's Not Done Climbing

NEW YORK ( TheStreet) -- After falling 9% the day after reporting fourth-quarter earnings that missed Street estimates, shares of Ciena ( CIEN) continues to see increased pressure following stock downgrades from analysts at RBC, UBS and FBR Capital Markets.

While Ciena didn't do itself any favors or instill the Street's confidence by issuing lower-than-expected guidance, I wouldn't get carried away here. Given that this company provides broadband, data networking and optical equipment services to Verizon (VZ), AT&T (T) and Sprint (S), this is still a story about carrier spending (something these same analysts predicted would return in 2013). That never happened. At least not to the robust levels they expected.

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While some questioned whether Ciena, competing with bigger rivals like Cisco (CSCO) and Juniper (JNPR), could ever survive the weak carrier spending environment, the company's management has done an exceptional job of growing both revenue and free-cash-flow. Ciena has been able to post consecutive quarters during which the company beat estimates and raised guidance.

More impressive was that Ciena's recent performances occurred amid rumblings about would "needing" Ciena as much following Verizon's deal with Vodafone (VOD). In that regard, I don't believe the company's management has gotten the credit it deserves. Even with the downbeat guidance, let's not overlook that revenue in the recent quarter advanced 25% year-over-year and 8% sequentially, besting Street estimates by 3%.

The better-than-expected performance was helped by tremendous growth in areas like Converged Packet Optical and Software and Services (up 60% and 20%, respectively). Ciena's top-line and order growth continue to exceed management's own estimates. Why, then, is the Street overreacting to nothing more than cautious guidance?

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