Networking hardware firm Ciena Corporation (NYSE:CIEN)’s shares are up by more than 150% over the past year. As is the case with other networking equipment providers, the firm is also benefiting from the AI buildout. Cramer discussed Ciena Corporation (NYSE:CIEN) in his morning appearance on September 3rd and commented on the impact of the recent bearishness about optical networking products on the firm:
“The long knives are out for optical. . .I mean people just say you know what, optical no doesn’t just cut it. And I am quite surprised, going back and forth people can’t figure out, why the world’s turned on optical! And they like copper. Optical’s the future! That’s heading for the two-for-one split there. I am shocked at this. . .Ciena, Corning, Lumentum, and Coherent, I had to lose that group, I just think, the world’s turned on them. At a certain point I want to come back to them because I think they’re the future.”
Ciena Corporation, like other data center equipment providers, has also benefited massively from the AI buildout. The firm’s third quarter earnings, reported on September 3rd before market open, saw its shares close 10% lower. While the results did see the firm post growth across several metrics, its guidance was less than stellar. For its third quarter, Ciena Corporation guided $1.75 billion in revenue, which was in line with estimates.
Additionally, the firm’s revenue, as is the case with other data center providers as well, depends heavily on two customers. According to the details, not only do cloud providers account for 53% of the firm’s revenue, but two customers also accounted for 41.75% of Ciena Corporation’s revenue. Consequently, the extreme dependence on one industry and a handful of customers opens the firm to extreme headwinds if only a handful of variables shift. Not to mention, management also outlined that orders are growing faster than revenue, which can lead to supply constraints and customer friction.
As a result, the debate for Ciena Corporation is whether the firm will be able to meet customer demand and operate in a market that can grow in the future. The firm’s guidance plays an important role in it as well since it provides a snapshot of future growth expectations. However, Ciena Corporation’s order backlog of $8.5 billion was a new record and stretches into 2029 to provide visibility.
Looking at visibility, Ciena Corporation’s forward P/E ratio of 40.82 is in line with Corning’s 40.65 and slightly lower than Lumentum’s 45. As for the hedge funds, Insider Monkey’s data shows that 81 funds held a stake in Ciena Corporation. This was lower than Corning’s 99 and Lumentum’s 111. However, just as Lumentum’s hedge fund sentiment is the highest, so is the short interest as a percentage of float of 8%.
READ NEXT: Jim Cramer Draws the Line on NVIDIA in China: Why National Security Comes First and Jim Cramer Defends His Dell Stance as Investors Complain About Missing Out.
