Entering text into the input field will update the search result below

Ciena: Outlook Remains Constructive, Despite Lowered Top-Line Growth For 2020

Jun. 08, 2020 12:59 PM ETCiena Corporation (CIEN)1 Comment
Carlos R. Tartarini profile picture
Carlos R. Tartarini


  • Growing network traffic and demand for bandwidth remain a strong tailwind for Ciena's applications, as its WaveLogic optical technology has been largely adopted by service providers, web-scale providers, and MSO.
  • The outlook for the remainder of the year 2020 is more modest in the international market, as the limited access to the sites has affected the speed of new projects.
  • Target price of $62 is appropriate if not conservative since my assumptions are based on a doable top-line growth and margins in line with the company expectations.

Quarterly results posted by Ciena (NYSE:CIEN) reflected business and operation strength, as the network solutions provider delivered revenue and earnings growth exceeding estimations. Meanwhile, Ciena has lowered the top-line growth forecast for the year, in light of the coronavirus-related environment.

Despite a near-term relatively neutral backdrop, the innovation path of the company and recent project wins underscore the fact that Ciena is well positioned to benefit from the high demand for bandwidth in the years ahead.

Earnings highlights

Throughout the recent quarter finished at the end of April, Ciena faced some supply disruptions related to components constraints, extended lead time, and temporary reduction in activity due to coronavirus-related restrictions. Despite that, Ciena notched revenue growth of 3.4% year-over-year, hitting $894 million, driven by web-scale projects that now represent 24% of total revenue and Tier 1 service providers, notably in North America and EMEA.

Gross profit margin climbed to 46.9% from 43.9% a year ago, as Ciena has moved forward on its operation optimization strategy, including cost reductions and vertical integrations, targeting a margin gain of 100 basis points to the range of 43% to 45%. In addition, Ciena has also been temporarily benefitted from lower costs in the early stage of the projects, given difficulties in engaging with customers caused by the pandemic.

Operating expenses were also lower than expected, driven by a reduction in travel expenses after the pandemic. This scenario of top-line growth, combined with operational efficiencies and limited expenses, resulted in a jump of adjusted operating margin to 17.9% from 12.7% a year ago and adjusted EPS climbing to $0.76 from $0.48% last year, handily outpacing consensus of $0.52.

As we can see below, quarterly results have just added to the operational improvement trend experienced by Ciena over the last 5 years, especially after mid-2018 when we saw gross

This article was written by

Carlos R. Tartarini profile picture
I am an individual investor. My main focus on investing is to achieve capital appreciation by selecting high value and compelling growth opportunities.

Analyst’s Disclosure: I am/we are long CIEN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.