"With higher confidence on the top line combined with margin improvements and operational consistency, we can see a scenario where the stock can reach $40," RBC Capital analysts said.
Ciena is a provider of communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic.
Order growth is picking up driven by broadening new customers relying on optical to connect their major datacenters, according to the analyst note.
Separately, 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 revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 11.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Compared to other companies in the Communications Equipment industry and the overall market, CIENA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 42.05% is the gross profit margin for CIENA CORP which we consider to be strong. Regardless of CIEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CIEN's net profit margin of 3.32% is significantly lower than the industry average.
- The debt-to-equity ratio is very high at 9.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, CIEN has managed to keep a strong quick ratio of 2.23, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: CIEN Ratings Report