Ciena Corp. (NYSE: CIEN) recently announced better-than-expected revenue for the fourth quarter, but its adjusted profit came in below consensus forecast, sending its shares down more than 2 percent on Thursday. However, the stock recovered on Friday after gaining 1.71 points.
The Hanover, Maryland-based networking company reported earnings of $65 million, or 42 cents for the quarter ended October 31, as compared to 51 cents per share in the same period of 2019. On an adjusted basis, profit rose to 60 cents per share, versus 58 cents per share in the year-ago quarter. Analysts on average were expecting Ciena to report adjusted profit of 63 cents per share.
Revenue came in at $828.5 million, down from $968 million in the comparable period last year, but above consensus forecast of $825.3 million.
Source: Getty Images [CEO Gary Smith]CEO at Ciena, Gary Smith said the latest quarterly performance shows that the company can perform well even in a challenging environment. He added, “while we expect current market conditions to persist in the near-term, we are confident in strong secular demand dynamics and our ability to continue to outperform the market.”
The company also announced that it will reinstitute its share repurchase program in the first quarter of 2021. It plans to buy back shares worth $150 million during the next year.
Analysts Coverage
Some research firms updated their ratings and price target estimates for Ciena stock after its fourth-quarter results. B. Riley analyst Dave Kang on Friday raised his ratings price target for the stock to $51.50 per share, from $46 per share, while maintaining a “Neutral” rating on the company.
Separately, Barclays analyst Tim Lon on Friday also increased his price target for the stock to $62 per share, from $54 per share. Lon reaffirmed an “Overweight” rating for the company.
Overall, the consensus price target for Ciena stock is $54 per share, translating to a surge of nearly 14 percent from the stock’s closing price of $47.81 in the previous trading session. The highest price target estimate for the stock is $62 per share, while the lowest price target estimate is $47.82 per share. When it comes to recommendations, most analysts have a “Buy” rating for Ciena.
Growth Prospects and Risks
Ciena has been trying to boost profitability by diversifying its business and stepping into new markets. Continued diversification is also critical for the company to address the dynamic market environment in which it operates, and better survive any potential slowdowns in any segment or geographical region. Moreover, it continuously needs to invest in research and development activities to enhance its products and services, so that its offerings stay relevant in the rapidly changing market.
Source: Getty Images
The company faces intense competition from both established and small network solution providers. Technological advancements, the frequent rollout of new services, and pricing pressure are some of the key factors that have further fueled the competition in the market.
Ciena competes in the network solutions market against some of the big names including Cisco Systems, Nokia Corp, and Juniper Networks, among others. Most of its rivals are well-established players of the industry and possess far greater financial and operational resources, besides a broad product portfolio. Considering the scale and reach of its rivals, Ciena must keep performing exceptionally well to grow at a reasonable pace.
Stock Performance
Ciena stock has seen many ups and down in the current fiscal year. The stock started the year at a price of around $42 per share but fell sharply to a low of $34 in March soon after the Covid-19 outbreak. The stock significantly rose in the subsequent months to hit a high price of $61 in August.
However, Ciena share price fell more than 24 percent on September 3, the day it released its financial results for the third quarter. Its Q3 results surpassed expectations but shares declined after the company said back then it is receiving fewer orders due to the pandemic.
Overall, Ciena share price has increased nearly 12 percent on a year-to-date basis. The company’s market value stands at $7.39 billion, while its P/E ratio is 20.61.
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