Ciena Corporation (CIEN): Judgment Day Is Coming for This Company

On outlook

If Ciena Corporation (NASDAQ:CIEN) manages to navigate the above-mentioned hurdles, it would boil down to the outlook. As I’d said earlier, there have been mixed cues about the health of telecom spending.

While telecom gear maker ADTRAN, Inc. (NASDAQ:ADTN) had provided a good outlook and said that its carrier and enterprise businesses are expected to do well, optical networker JDS Uniphase Corp (NASDAQ:JDSU) went the opposite way as delays by carriers in releasing their budgets led to a dismal performance and outlook.

ADTRAN, Inc. (NASDAQ:ADTN) and Uniphase have customers which are common with Ciena, and as such, their results were important for Ciena as well. Going by ADTRAN’s version, its major North American customer, which is probably AT&T Inc. (NYSE:T), would be aggressively upgrading its network, and this is in fact true. In addition, ADTRAN, Inc. (NASDAQ:ADTN) is also looking to benefit from the infrastructure upgrade in Europe by another of its major Tier 1 customer.

And if we look a bit deeply at Uniphase’s recently-released results, it looks like the company was suffering from a temporary slowdown. Uniphase had finished the quarter with a book-to-bill ratio of above 1, which indicates that it is indeed witnessing orders flowing in. However, it isn’t quite sure of the timing of the roll outs and as such, had issued a seemingly conservative guidance.

But then, if Ciena Corporation (NASDAQ:CIEN) is indeed ahead of the rest in the industry, it should be able to provide a decent outlook since telecom spending is still there. Also, Ciena’s diversification across the globe, especially in Asia, is another reason why it might do well on outlook as well.

The takeaway

Ciena might or might not do well, depending on the underlying trends in the industry, but as I’ve stressed before, the long-term prospects are still good. However, I won’t suggest initiating a position now as Ciena is richly valued with a forward P/E of almost 20 and Enterprise Value/EBITDA of around 28. But then, if company falters in the upcoming quarterly report and shares fall, investors should consider adding to their Ciena Corporation (NASDAQ:CIEN) positions.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Judgment Day Is Coming for This Company originally appeared on Fool.com.

Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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