Ciena Beats, But Loses Ground

Ciena (CIEN) this morning reported revenue for its fiscal second quarter ended April 30 of $242. 2 million, ahead of the Street consensus of $238.3 million. Non-GAAP profits of 40 cents a share were three pennies ahead of the consensus. (See earnings call transcript.)

The company also said that it continues to expect revenue growth for the October 2008 fiscal year of “up to 27%,” which implies $990.5 million, a little ahead of the Street view of $985.5 million.

Nonetheless, the stock is losing ground. One reason: Standard & Poor’s telecom analyst Ari Bensinger today cut his rating on the stock to Hold from Buy. He notes that both sales and gross margins exceeded his forecast on strong demand for optical gear “with customers needing to handle an increasing use of network bandwidth.” He expects strong industry fundamentals ahead, but also sees higher operating expenses, partly related to the company’s recent acquisition of World Wide Packets, “hampering margin expansion.”

He cut his price target on the stock to $32 from $36.

CIEN today just after 1 p.m. EDT  is down $1.66, or 5.45%, to $28.80.

Comments

[CrossProfit:]

Ari Bensinger is dead wrong. Margins increased from 43% a year ago to 54% current. No one expects margins to stay at 54%, so when they come back down they will be reverting to the norm.

At 27% annual growth, $36 may even be low.

Sorry for the 'dead wrong', but such is the case.

CrossProfit

2008 Jun 05 02:28 PM