Shares of Ciena (NYSE: CIEN) were down 10.9% on March 7, after the American telecommunications networking equipment and software services company reported mixed fiscal Q1 results. Earnings topped estimates, but revenues failed to meet expectations.
Q1 Numbers
Adjusted earnings of $0.47 per share were two cents ahead of analysts’ expectations of $0.45 per share. Comparatively, it was lower than adjusted earnings of $0.52 per share for the prior-year period.
However, revenues jumped 11.5% year-over-year to $844.4 million but lagged consensus estimates of $856.85 million.
Disappointingly, gross margin declined 180 bps to 45.5% while adjusted operating margin declined 280 bps to 11.8%.
CEO Comments
Ciena CEO, Gary Smith, commented, “We expect our strategic investments to drive a significant increase in supply chain capacity in the second half, and therefore remain confident in our ability to address demand and achieve the strong revenue growth we expect for the fiscal year.”
Wall Street’s Take
Following the Q1 results, Evercore ISI analyst Amit Daryanani decreased the price target on CIENA to $75 from $80 and reiterated a Buy rating.
Daryanani believes that the company is, “Well-positioned to sustain double-digit top-line growth in FY22 and beyond given the strong backlog and need for bandwidth expansion across multi geographies.”
He further stated, “While the revenue/GM guide does suggest a heavy H2 ramp, we think FY21 is a good indicator that the company can deliver on this.”
Consensus among analysts is a Strong Buy based on 12 Buys and 2 Holds. The average Ciena stock forecast of $82.21 implies 35.15% upside potential to current levels.
TipRanks’ Smart Score
CIEN scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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