Wednesday, March 30, 2016

Seeking Alpha: Ciena: An Always-Volatile Play On Telecom And Data Center Spending

It seems like the only sure thing regarding Ciena (NYSE:CIEN) is that the shares of this optical networking equipment company will always be volatile. The shares have spent the last five years bouncing between the low teens and high $20s, with that range tightening up to $15 to $25 over the last couple of years. While the growth outlook for the company's 6500 and Waveserver platforms is strong on the basis of telecom/cable and data center spending expectations, Ciena has ample competition from the likes of Huawei, Infinera (NASDAQ:INFN), and Nokia (NYSE:NOK) and healthy margins and cash flows in this sector have never been particularly sustainable.

While Ciena's first quarter results and guidance weren't disastrous, they offer a reminder that the company's business is volatile and hard to predict, and that the Street seems to always hold these shares with one eye firmly fixed on the exit. A fair value in the low $20s and the potential to trade higher than that on "it's different this time!" enthusiasm if/when orders really start rolling in is a reason for more aggressive investors to consider the shares, but the volatility and the prospect of perpetually inadequate ROICs is going to be a bigger stumbling block for value/quality-oriented investors.

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Ciena: An Always-Volatile Play On Telecom And Data Center Spending

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