If you want to see some real life, zero-turns-hero instances, look no further than the stock markets. Just six months back, analysts were critical of communications equipment maker Ciena Corporation (NASDAQ:CIEN), slapping the stock with rating downgrades. Even myopic investors had joined them then, after the stock missed estimates and panic selling shaved 20% off its market capitalization. But, Ciena’s business is such that it would ultimately do well, even though it might witness short-term pain.
Thus, I knew that value investors would have jumped onto the stock after that sell-off in September and they are now sitting on gains of almost 30%. Ciena Corporation (NASDAQ:CIEN) has made a heroic comeback since, outsmarting the army of analysts who were expecting it to post a loss in the recently-reported first quarter, and soaring more than 17% in the wake of terrific results as Fool analyst Brian D. Pacampara pointed out. And unsurprisingly, there’s a lot of optimism around the stock.
Why Ciena was never in trouble
As Brian pointed out in his article, there were concerns about Ciena’s business being hit due to tepid demand, and this had kept the stock subdued this year before it busted those myths in its latest report. How could’ve the Street expected Ciena Corporation (NASDAQ:CIEN) to slowdown this year is a mystery to me, since there have been some concrete indications in the past few months that the stock should have another successful year.
When telco giant AT&T Inc. (NYSE:T) sounded out is intention of stepping on the gas to roll out faster networks aggressively, Ciena’s prospects had brightened up since Ma Bell is a 10%-plus customer. AT&T intends to provide LTE coverage to 300 million customers by the end of next year, and the company would be investing $14 billion over three years to upgrade its wireless and wireline networks. Moreover, AT&T Inc. (NYSE:T) expects total capex to be $22 billion a year for the next three years, which is great news for Ciena Corporation (NASDAQ:CIEN).
And finally, when optical networker JDS Uniphase Corp (NASDAQ:JDSU) came out with a stunning quarterly report earlier this year, it became clear that networking stocks are in for a good time. Uniphase’s strong execution, product development moves, and an upswing in capital spending by telecom companies led management to forecast a better year. Ciena’s results and outlook further prove that the recovery is not baseless, and this is the reason why optical networking stocks, including JDS Uniphase Corp (NASDAQ:JDSU), should have a good time.