Why Ciena Shares Surged

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.

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