William Blair Raises Ciena Estimates After Q1 Report, Says Company Has 'Market-Leading' Product Portfolio

Network technology name Ciena Corporation CIEN reported above-consensus adjusted earnings per share and 4-percent year-over-year revenue growth for the first quarter of 2018 on Tuesday. 

The Analyst

William Blair analyst Dmitry Netis reiterated an Outperform rating on Ciena shares. 

The Thesis

Ciena further diversified its customer base, with non-telco accounting for 35 percent of revenue, and direct webscale revenue more than doubling year-over-year to 15 percent of total revenue, Netis said in a Wednesday note.

The company saw better-than-expected order flow, with bookings slightly exceeding estimates and rising backlogs, the analyst said. 

"New customer wins in new territories (such as Japan and South Korea) that have been closed to Ciena in the past are a clear sign of a market-leading product portfolio and market share gains," Netis said. 

Ciena's second-quarter revenue and gross margin guidance were in line with the consensus, Netis said. The tech company reiterated long-term targets of 5-7 percent revenue growth and 14-16 percent earnings per share growth.

William Blair raised its Q2 and fiscal 2018 estimates for Ciena, with the firm continuing to see an attractive risk-reward profile for the stock.

"Strong multiquarter visibility and positive EPS revisions, as previewed, due to a lower non-GAAP tax rate (26 percent versus prior 36-37 percent), should reignite investor interest in the stock," Netis said. 

The Price Action

Ciena shares were down close to 10 percent over the year through Monday. 

Ciena shares rallied 10.1 percent Tuesday after the Q1 report. 

The shares were up 2.57 percent at $26.36 at the time of publication Wednesday afternoon. 

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Photo courtesy of Ciena.