Why Ciena Shares Surged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of network equipment maker Ciena popped 14% today after the company's quarterly results and outlook topped Wall Street expectations.

So what: The stock has stagnated in recent years on slow spending from telecom companies, but a surprise second-quarter adjusted profit of $0.02, coupled with upbeat guidance for the current quarter, reinforces recent optimism over rebounding demand. In fact, revenue grew 6.3% while gross margins expanded 300 basis points over the year-ago period, suggesting that Ciena's competitive position is strengthening, as well.


Now what: Management sees third-quarter revenue of $515 million-$545 million, well ahead of Wall Street's view of $509.5 million. "We have designed Ciena to take advantage of the fundamental shift in network architecture driven by changing end-user demands," said CEO Gary Smith. "These dynamics are creating new opportunities that we believe will enable us to continue making progress toward our long-term financial goals." With the stock now up more than 50% from its 52-week lows and trading at a 20-plus forward P/E, however, much of that progress might already be baked into the valuation. 

Interested in more info on Ciena? Add it to your watchlist.

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The article Why Ciena Shares Surged originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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