Ciena Corporation (NYSE: CIEN) specializes in networking systems, services, and software. Networking Platforms, Platform Software and Services, Blue Planet Automation Software and Services, and Global Services are the company's four segments. The Converged Packet Optical and Packet Networking portfolios make up the Networking Platforms category. Platform Software and Services provides clients with analytics, statistics, and planning capabilities to help them manage Ciena's Networking Platforms products in their networks. Blue Planet Automation Software and Services provides a micro-service, standards-based open software package that enables companies to achieve large-scale software and IT-led operations support system (OSS) changes. The Global Services division covers sales of a variety of Ciena services such as maintenance, training, installation and deployment, and network design.
Key Takeaways from first quarter FY22 financial results
Other key highlights from Q1 FY22 Financial results
Balance Sheet & Liquidity Position
Top 10 shareholders
The top 10 shareholders together form around 38.53% of the total shareholding, while the top 4 constitute the maximum holding. The Vanguard Group, Inc and BlackRock Institutional Trust Company, N.A. hold the maximum stake in the company at 9.44% and 8.12%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Source: REFINITIV, Analysis by Kalkine Group
This year, the business anticipates a good second-half performance, owing to a large expansion in supply chain capacity in the second half. It is forecast to generate revenue in the range of USD 930 million to USD 970 million in Q2, with an adjusted gross margin of 42 percent to 44 percent. This reflects the company's revenue mix expectations for Q2, which include a higher share of lower-margin common equipment. The company's gross margin for fiscal year '22 is estimated to be in the range of 43 percent to 46 percent, with adjusted operating expenses of USD 300 million in Q2.
Valuation Methodology: Price/Earnings Per share - Multiple Based Relative Valuation
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Over the past six months, CIEN's share price has corrected by 19.10%. The stock is currently leaning towards the lower end of its 52-week range of USD 48.16 to USD 78.28. We have valued the stock using the Price/Earnings multiple-based relative valuation method and arrived at a target price of USD 59.22. We believe that the company is trading at a discount from its peer's average but strong fundamentals, a positive outlook, and a good cash position give bullish estimates for the upcoming near future. We have taken peers like Juniper Networks Inc, F5 Inc, Lumentum Holdings Inc, and others for the evaluation of the intrinsic value.
Considering the strong fundamentals, robust sales, positive outlook, associated risks, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 49.58, as of May 25, 2022.
CIEN’s Technical Chart, as of May 25, 2022. Data Source: REFINITIV, Analysis by Kalkine Group
Technical Analysis Summary:
*Closing price as of May 25, 2022.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Note 3: The report publishing date is as per the Pacific Time Zone.
Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.
Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.