Ciena Continues To Grow Faster Than Peers, Argus Reiterates Buy Rating

Following the robust Q3:16 results and solid margin guidance for Q4:16, Ciena Corporation CIEN shares rose 7 percent.

Argus’ Jim Kelleher reiterated a Buy rating on the company, with a price target of $30.

Growing Faster Than Peers

“The company continues to grow revenue faster than peers while using volume leverage and mix to expand margins and grow EPS,” Kelleher mentioned.

Related Link: Morgan Stanley Downgrades Ciena Corporation After 20% Jump Last Month

Ciena has been benefiting from its diversification across geographies, as well as growth n non-traditional customers, which accounted for 37 percent of the revenue in Q3:16.

Solid Q3

The company reported 11 percent annual revenue growth for Q3, representing its highest growth during fiscal 2016. Non-GAAP EPS came in at $0.42, growing in the double digits, as Ciena continued to expand its adjust gross margin and control operating costs.

“Ciena has become the market leader in submarine upgrades and has a rising share in new submarine originations, particularly in AsiaPacific,” the analyst stated, while adding that in term so future business, “the Blue Planet network orchestration business is in multiple trials and pilots, and should begin to ramp to revenue in fiscal 2017.”

Kellher expects this software-based solution to further help the company expand margins.

Q4 Guidance

For Q4:16, Ciena guided to revenue of $715 million, representing 3 percent year-on-year growth, although the midpoint of the guidance was marginally below consensus.

According to the Argus report, “Margin guidance for 4Q16, even with some one-time operating expenses, suggests another positive quarter of double-digit EPS growth.”

Full ratings data available on Benzinga Pro.