Ciena's Optical Business Takes A Poke To The Eye From Service Providers

“Buy the dip!”

Great advice, right? There’s just one problem – by and large, those “dips” don’t just come out of the blue. For a popular stock with an attractive underlying business, a meaningful selloff requires something that scares the Street, and usually what scares the Street will scare individual investors too.

Ciena’s (CIEN) significant reduction in guidance for the next quarter, and warning that the weakness would likely persist for a few quarters, was indeed scary, but I don’t think it changes the long-term outlook all that much. I think Ciena’s recent success likely attracted investors who weren’t as familiar with the business, and probably lulled more experienced investors into complacency, but the volatility from service provider accounts that Ciena cited is, historically, really not that unusual.

I don’t want to underplay the risk that Ciena’s guidance could still need to be revised further, and I won’t ignore the fact that the Street is a “what are you doing for me today?!?!” world where weaker near-term relative performance can be punished harshly. Still, I think the core of this business is strong, the growth drivers are still place, and the shares are now undervalued.

 

Click here for more: 

Ciena's Optical Business Takes A Poke To The Eye From Service Providers