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Ticker Shock: Ciena's Small Loss Still Isn't a Win


Friday's top stories and stocks with potential to move.

Ah, a nice long weekend is on the near horizon. Hot dogs, beer, and backyard wiffleball awaits.

Asian stocks were a mixed bag overnight. The Hang Seng rocketed 2.82% higher. But the Nikkei fell 0.27%. European stocks were in the green earlier this morning. And here in the US, we're in positive territory.

Here's what I'm looking at this fine Friday morning:

Ciena (CIEN):
Ciena was out with its third-quarter results yesterday and I didn't have a chance to weigh-in after.

Its loss, excluding items, was a nickel in the period, which was way better than the $0.13 loss the Street had been expecting. It beat on the top line too, which I wasn't expecting. And to boot, its chief executive Gary Smith offered the following in the release, which I believe the bulls will find uplifting: "We expect our fiscal fourth quarter revenue will be roughly flat with our fiscal third quarter level."

Here's my take:

1. I think the bulls have something to cheer about here. It was better than expected. And it painted a somewhat decent picture for the fourth quarter. But to repeat what I've said before, what's there to justify that $13 share price? I don't get it. With the mound of red ink that's expected this year and paltry profit that's expected next, I want no part of it.

2. If bright sunshiny days were immediately ahead, wouldn't insiders -- who probably know more than anyone about the company -- be bellying up to the bar?

3. That said, if it does manage to get a little wind at its back, there's a chance of making a new high, which could draw other followers. But even if it did that, one of those followers wouldn't be me: I think its way overextended.

For my previous take, see Five Reasons Ciena Has More Risk than Reward.

Abercrombie (ANF):
Fellow Minyan Justin Sharon points out in Upgrades & Downgrades: Abercrombie Gets Cut that Citi dropped its rating from Hold to Sell.

My two cents.:

1. While I don't want to dismiss its chances a couple years down the road, there are some things I find a bit tough to like. For example, the 29% drop in comps during the month of August was a monumental beating. And there's the fact that it trades at more than 33 times this year's estimate, which is now $0.92.

2. The good news is, monthly comparisons could be a lot easier next year. (I'm trying to look at the bright side.)

Bottom line, I'm most definitely not a bull on these guys and believe there are better opportunities in this space.
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No positions in stocks mentioned.

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