Ciena (CIEN:NYE), the network and communication infrastructure provider, delivered better-than-expected results in the fiscal second quarter. Despite the positive performance, CIEN stock faced an 11% decline in Tuesday’s after-hours trading session due to the company’s weaker-than-anticipated revenue guidance for the third quarter.
In Q2, Ciena achieved adjusted earnings per share of $0.74, surpassing analysts’ consensus estimate of $0.63 and showing significant growth compared to the year-ago quarter’s $0.50 per share. Sales also demonstrated a noteworthy increase of 19.3% year-over-year, reaching $1.13 billion, exceeding analysts’ expectations of $1.08 billion.
Although the earnings release prompted two analysts to review their ratings on CIEN stock and maintain a Hold, Morgan Stanley analyst Meta Marshall expressed optimism about Ciena’s long-term growth potential. Marshall emphasized the company’s expanding market share and efforts to broaden its total addressable market (TAM). However, concerns were raised about the recent decrease in orders from both Product and Service customers, with hopes that this decline is temporary.
Q3 Earnings Guidance:
Looking ahead, Ciena provided guidance for Fiscal 2023, projecting revenue growth in the range of 18% to 22%, slightly below the consensus estimate of 19.6% growth. Additionally, the company raised its operating expenses guidance to approximately $1.33 billion, reflecting continued investments in TAM expansion.
For the fiscal third quarter, Ciena anticipates revenue to be in the range of $1 billion to $1.08 billion, falling short of Wall Street’s expectations of $1.10 billion. The company also expects adjusted expenses for Q3 to be around $335 million.
CIEN Stock-Analyst Ratings:
With 10 Buy recommendations and 3 Holds from top Wall Street analysts, there is optimism surrounding CIEN stock. The consensus analyst rating stands at Strong Buy, and the average 12-month price target of $65.75 suggests an upside potential of 55.1%. It is worth noting that these analysts have a successful track record of generating significant returns from their recommendations, further enhancing investor confidence.
The Takeaway:
Despite the stock’s recent decline, Ciena’s strong Q2 performance and optimistic outlook indicate its potential for future growth. While the lower Q3 guidance may have initially disappointed investors, the company’s strategic initiatives and positive analyst sentiment position it favorably in the market.
