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By George Leong, B.Comm. Published : April 27, 2018
Ciena Stock on the Verge of Breaking Higher
Networking stocks continue to have strong tailwinds for superior growth on the horizon. A mid-cap networking solutions company that is showing some strong technical signs of staging a major breakout is Ciena Corporation (NYSE:CIEN).
Ciena stock is operating in a sweet spot in technology growth. The company produces networking solutions that help supercharge the Internet and communications areas.
You only have to think about the superlative growth in the Internet and networking to understand why the catalyst for share appreciation is high for CIEN stock.
But prior to examining the underlying fundamentals for Ciena, let me show you why CIEN stock could be setting up for a breakout on the chart.
The first thing you will notice on the Ciena stock chart is the bullish rounding bottom that incorporates a bullish golden cross and an upside trade gap.
Chart courtesy of StockCharts.com
The two indicators generally point to sustained gains on the horizon. An immediate price target for CIEN stock is $30.00, followed by a move toward the $35.00 level from 2008.
Chart courtesy of StockCharts.com
CIEN Stock Is Supported by Bullish Fundamentals
Revenues have risen in four consecutive years and the growth is expected to continue at 5.2% and 5.7% for fiscal 2018 and fiscal 2019 (ending in October), respectively. (Source: “Ciena Corporation (CIEN),” Yahoo! Finance, last accessed April 27, 2018.)
|
Ciena Corporation Revenues ($ Billions) |
|
| FY13 | $2.08 |
| FY14 | $2.29 |
| FY15 | $2.44 |
| FY16 | $2.60 |
| FY17 | $2.80 |
| FY18 | $2.95 (Estimate) |
| FY19 | $3.12 (Estimate) |
While the revenue growth rate for Ciena stock could be better, I’m encouraged by the fact that gross margins are edging higher and earnings estimates are rising.
|
Ciena Corporation Gross Margins |
|
|
FY15 |
43% |
|
FY16 |
44% |
| FY17 |
48% |
Earnings for Ciena have followed revenues higher but are estimated to fall in 2018 prior to a rebound to as high as $2.07 per diluted share in 2019. (Source: Ibid.)
The high earnings per share (EPS) estimate gives CIEN stock an attractive forward multiple of about 12.6 times, which is at a discount to the S&P 500 and the networking applications group.
Analyst Take
The bullish CIEN stock suggests an upside move on the horizon.
Add in the fact that Ciena stock is attracting good insider buying and you sense things are getting better.
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