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Ciena Corporation (CIEN), Finisar Corporation (FNSR), JDS Uniphase Corp (JDSU): These Stocks Stepped on the Gas in Q2 and Should Get Better

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Ciena Corporation (NASDAQ:CIEN)When 2013 began, there were a few stocks that I had tipped for success. At the end of the first calendar quarter, I reviewed my calls and found that they were, well, not exactly where I wanted them to be. However, the stock market is not a short-term game and there were a few solid reasons why I’d expected these stocks to succeed this year and in the future as well.

Their returns at the end of the second calendar quarter prove the fact that if a company’s long-term prospects are good, one should ignore the short-term pain. And if you were patient and had persisted with these stocks, then the second quarter would have been a great one for you.

Let’s see which stocks I’m talking about and how they stood at the end of the first half of 2013.

Company Expectation 1Q Returns Half-yearly Returns
Ciena Corporation (NASDAQ:CIEN) Will appreciate 4.44% 26.73%
Finisar Corporation (NASDAQ:FNSR) Will appreciate -16% 7.96%
JDS Uniphase Corp (NASDAQ:JDSU) Will appreciate 1.56% 9.34%
Xilinx Will appreciate 8.09% 12.17%

Stock price data (from Dec. 31, 2012 to June, 28, 2013) taken from Google Finance

See what I’m talking about. The prospects of all these companies were bright when I’d reviewed them at the end of last year, but due to cautious sentiment on the Street regarding their end markets, they had failed to take off in the first quarter. But, the second quarter proved to be a revelation for almost all of them and I believe that they can continue their positive momentum. Let’s take a closer look at each of them.

Leading the way

Communications equipment maker Ciena Corporation (NASDAQ:CIEN) has turned in a solid performance so far this year. Two terrific quarterly reports, where it posted profits while analysts had expected losses, have propelled the stock to its highs and there is every reason to believe that it will continue scaling new highs. A big client list with more than 1,000 customers and presence of lucrative accounts such as AT&T Inc. (NYSE:T), Verizon, BT etc. makes Ciena Corporation (NASDAQ:CIEN) a top stock to profit from the deployment of faster networks and cloud computing.

Ciena is looking to benefit from higher data consumption going forward, and the company has positioned itself by focusing on software intelligence. The proliferation of automated and programmable networks, according to Ciena, will require multi-year re-architecturing of networks and the company is looking to profit from this trend by pushing its open architecture.

The deployment of 100G optical products, along with ethernet and switching, are expected to drive Ciena Corporation (NASDAQ:CIEN)’s top line higher going forward according to Jess Lubert of Wells Fargo. Throw in the company’s diversified client base, which includes the likes of Telefónica Vivo in Brazil and certain important customers in Asia, and it becomes clear that Ciena ticks the right boxes as it is plying its trade in a growing industry and has a diversified client base.

Moreover, Ciena Corporation (NASDAQ:CIEN) has witnessed a bigger order backlog in the past two quarters than the revenue earned by it, along with improving margins. These points indicate that Ciena has enough fuel in the tank to power higher even after the solid gain recorded so far this year.

The turnaround story

At the end of the first quarter, optical networker Finisar Corporation (NASDAQ:FNSR) was struggling and had disappointed investors as it declined 16%. As I’d pointed out in my Q1 review, Finisar was well-positioned to profit from telecom and cloud spending, but analysts weren’t willing to buy that theory. Thus, even though the company was doing well, its stock price wasn’t.

However, the stock sprung to life last month after a terrific earnings report. From here, it should be all positive for Finisar Corporation (NASDAQ:FNSR) as data center build out and deployment of faster networks by telcos, coupled with Finisar Corporation (NASDAQ:FNSR)’s solid product development moves, should help it perform even better going forward. The company counts bellwethers such as Cisco, AT&T, and Verizon on its client list and this further strengthens the bull case for Finisar.

The company recently started shipping its new 100G module on a pilot basis and would move into full production later this year. In addition, its 10G SFP wire, which is better than the copper solutions present on the market, is already finding takers and the company looks set to capture this demand by ramping up production. Moreover, like Ciena Corporation (NASDAQ:CIEN), even Finisar Corporation (NASDAQ:FNSR) is looking to profit from a multi-year upgrade cycle of one of its key customers, which is probably AT&T.

Thus, given the strength in the company’s end markets and its new products, I believe that the good times have just begun for Finisar Corporation (NASDAQ:FNSR).

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