Why Ciena Corporation Shares Soared Today
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 networking equipment technologist Ciena surged 15% today after its quarterly results and outlook impressed Wall Street.
So what: The stock had pulled back sharply in recent months on concerns over slowing growth, but today's second-quarter results -- adjusted earnings per share of $0.17 topped the consensus by $0.04 on a revenue increase of 10.4% -- coupled with upbeat guidance are quickly easing those worries. In fact, adjusted operating margin expanded 250 basis points from the year-ago period to 6.2%, suggesting that Ciena's cost structure and competitive position are improving as well.
Now what: Management now sees third-quarter revenue of $585 million to $615 million, versus the consensus of $585 million, with adjusted gross margin in the low to mid 40s percent range. "As the shift continues toward on-demand networking models and as we continue to diversify our business, we expect to deliver steadily improving financial performance, including performance in the second half of the year that is stronger than the first half," said President and CEO Gary Smith in a press release. When you couple Ciena's still-questionable competitive moat with its suddenly hot stock price, however, I'd hold out for a wider margin of safety before betting on it.
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The article Why Ciena Corporation Shares Soared Today originally appeared on Fool.com.Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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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