The optical networking space is highly volatile. Companies like Ciena Corporation (CIEN) either blow past estimates, or miss badly, causing the shares to sell-off. This makes the stock a good trading idea for speculators with the stomach to handle the wide price moves. Ciena will report quarterly results on Thursday, December 8 before the market opens.
Ciena trades at a low forward earnings multiple of 11.9x. It may disappoint investors. In July, optical equipment maker Infinera (INFN) forecast a 20 percent drop in Y/Y revenue. Demand in North America and Europe are to blame. Analysts at Deutsche Bank feel differently for Ciena. They upgraded the stock on November 14 to a “buy.”
The market disagrees with the DB analyst outlook: Ciena’s stock peaked in September and made lower highs since. Last week, the stock fell another 9 percent, ahead of quarterly results.
On November 7, Fabrinet (FN) reported results that exceeded estimates. It cited strong demand from existing customers and a healthy optical networks industry
Takeaway
Ciena’s business health in the last quarter will depend on strong customer orders. Shareholders need not do anything ahead of the report, while those who missed the stock at the $16 bottom may want to wait until after the company posts its earnings results.
