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Bear Of The Day: Ciena Corporation (CIEN)

Brian Bolan

Ciena Corp (CIEN) recently beat the Zacks Consensus Estimate on the top and bottom lines, but guidance for the next quarter was below expectations and the stock saw estimates fall.  That helped push the stock to a Zacks Rank #5 (Strong Sell) but a deeper look at the report may give us some valuable insights.

Earnings Report

The company earned $0.51 when $0.49 was expected and posted revenues of $728M when $726M was expected.  Those numbers are good, but the stock market cares more about what you will do as opposed to what you have done.

The company guided next quarter to revenues of $720M -$750M and that is below the $770M consensus at the time fo the report.

Stocks in this market are "priced for perfection" and when you disappoint in anyway, your stock can get hit hard.  CIEN found that out as the stock immediately fell 5% in the premarket and continued lower by more than 11% in the session following the report.

Earnings Ahead

The company is set to report earnings again soon, December 7 to be exact.  The Zacks Consensus Estimate is calling for $739M on top and $0.51 on the bottom line. 

Other stocks in the same sector have been seen some weakness with AAOI in particular having some issues.  

There have also been a lot of put buyers on CIEN of late.  At least two times in the last 3 weeks this stock was highlighted as one that had notable action in the options market.

Options Market

In looking at the at the market straddle, I see a potential move of more than 9% being priced in for CIEN.  Three of the last four quarters the stock has moved more than what the options market has priced in.  Seeing as we are near the highs, the best bet would be to wait and see what happens in this sector over the next week or so.  A straddle placed just an hour or so before the close prior to the report is one potential given what I am seeing.



Ciena Corporation Price and Consensus

Ciena Corporation Price and Consensus | Ciena Corporation Quote


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