Ciena's Story Is Steadily Improving, But The Stock Hasn't Been So Steady

I’ve written more than once that Ciena (CIEN) shares often give investors “second chances” and that there are fairly frequent gaps between the company’s performance and near-term sentiment. And here we are again – while the company beat expectations in the fiscal third quarter and continues to gain share, the combination of concerns about global spending and management’s “failure” to raise guidance has the shares down about 13% relative to my last update.

I’ve written before that I like the idea of buying Ciena shares below $40, and as of this writing, that’s where we are, so this is a name that is very high on my prospective buy list. Yes, I am concerned about the potential of slower datacenter spending, as well as lumpiness in service provider deployments, but I’m willing to accept that risk given the share gain, market growth, and margin improvement offsets. Ciena certainly wouldn’t be immune to a broader market sell-off (particularly a tech-led sell-off), but again that’s a risk that I’m willing to accept on balance.

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Ciena's Story Is Steadily Improving, But The Stock Hasn't Been So Steady