It's been a pretty great week for Ciena Corporation (NYSE:CIEN) shareholders, with its shares surging 18% to US$41.38 in the week since its latest full-year results. Ciena reported in line with analyst predictions, delivering revenues of US$3.6b and statutory earnings per share of US$1.61, suggesting the business is executing well and in line with its plan. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Ciena from 19 analysts is for revenues of US$3.80b in 2020, which is a satisfactory 6.3% increase on its sales over the past 12 months. Statutory earnings per share are expected to shoot up 24% to US$2.02. Before this earnings report, analysts had been forecasting revenues of US$3.80b and earnings per share (EPS) of US$2.10 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
The consensus price target held steady at US$50.48, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Ciena, with the most bullish analyst valuing it at US$59.00 and the most bearish at US$34.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Ciena's performance in recent years. It's pretty clear that analysts expect Ciena's revenue growth will slow down substantially, with revenues next year expected to grow 6.3%, compared to a historical growth rate of 8.8% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.3% next year. So it's pretty clear that, while Ciena's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Ciena's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$50.48, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Ciena analysts - going out to 2024, and you can see them free on our platform here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.