Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Five Reasons Ciena Has More Risk than Reward


Long-haul, it looks good. Near-term is a different story.

This Thursday, Maryland-based network-equipment company Ciena (CIEN) is due out with its third-quarter earnings. So prior to that, I wanted to weigh in with some thoughts about the overall situation.

In a nutshell, here's what I like and don't like about this company:

On the upside:

1. The shares have had a sweet run since springtime (much like tech and the market). If it can get a decent gust of wind at its back, one could argue that a new high is doable.

2. It's expected to be in the black next year, which would be a good thing.

3. It's clearly got a big name. To boot, as fellow Minyan Sean Udall points out in The Top Five Reasons Ciena Won't Sell Out, "Ciena is one of the clear leaders (if not the premier company) in their space."

4. In the long run, I think the stock has a solid amount of upside potential from its current price.

On the downside, however:

1. I do think the stock has come a little far a little fast. Even if the company does meet the $0.09 estimate for 2010, that wouldn't be all that impressive, and it doesn't really justify the more than $13 share price.

2. The data show its missed estimates in the last three quarters, which doesn't leave me overly optimistic that the quarter to be announced will be too much different. Note that the current third-quarter estimate is a $0.13 loss.

3. I sense there's a great deal of expectation factored into the stock. But what happens if the economy doesn't bounce back the way people are expecting, and Verizon (VZ) and/or Sprint Nextel (S), or any other of its customers don't drop quite as much coin as expected? This is its potential Achilles heel, and the reason I'm afraid to get involved.

4. I would like to see insiders belly up in the open market at these levels.

5. Aren't there better opportunities out there right now? All things considered, I'd much rather play on the Verizon swing set. After all, it's expected to kick out results well in the black this year and next.

I like Ciena's chances long haul. But near-term, I just don't have the guts to hop aboard the train. In the low double-digits, however, I might change my mind.

Alternatively, management offering a better-than-expected outlook when it releases might change my tune, as well. But to be honest, I'm not really expecting that. Stay tuned.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos