Sina today
(As of 12/24/2024 at 05:10 PM ET)
- 52 week range
- $43.30
▼
$91.82
- P/E ratio
- 93.54
- Price target
- $77.00
Just as a stock can gap up in an earnings report, meaning the price initially rises when the market opens and sells back into the red during the day, stocks can also do the opposite, i.e. dump and gap up. This was the case with the leading optical networking solutions provider Sina Company New York Stock Exchange: Cien After announcing its financial profits for the fourth quarter of 2024.
Shares of the computer and technology sector giant initially sold off from $73.21 to $67.01 after the close but reversed course to rise to $82.00 on the morning price gap. This price action delighted investors and spooked short sellers to cover their losses as the stock continued to rise to a high of $91.82 in the following days. Let’s examine why that’s the opposite and what bodes well for the company moving forward.
Headline FQ4 2024 EPS numbers and metrics were worse than last year
The headline numbers Ciena reported for its fiscal fourth quarter of 2024 were disappointing and sparked an initial selloff. Ciena reported earnings per share of 54 cents, which was 11 cents below consensus estimates. Revenue fell 0.5% year over year to $1.12 billion, slightly beating consensus estimates of $1.1 billion. Adjusted gross margin decreased by 210 basis points to 41.6%. Operating expenses increased to $400.8 million, compared to $395 million. Operating margin decreased by 280 basis points year-on-year to 5.3%.
In other words, Ciena generated fewer sales at a higher cost, making less money compared to last year. By all accounts, the stock sale was justified.
Ciena controlled the narrative on the conference call
The stock market is always looking forward. This occurs during earnings season when companies report their past performance and provide guidance for future performance. By the time a company reports its quarterly results, it will already be a few weeks into the next quarter. This is why forward guidance is crucial. Sometimes, a company saves its forward guidance until its conference call after it explains last quarter’s results.
In Ciena’s case, the company took control of the narrative, painting an optimistic view of the FQ4’s performance during the conference call.
The boom in cloud computing, growing streaming services, 5G networks, the Internet of Things (IoT), and the boom in artificial intelligence (AI) ensure that data traffic continues to increase significantly. As such, Ciena is positioned to benefit from increased spending on network system upgrades and expansion. Bandwidth demand is the lifeblood of Ciena’s business, and has grown 30% year over year for more than two decades.
Ciena CEO Gary Smith echoed this theme, saying: “Our fourth-quarter revenue and strong order flow reflect our significant and growing technology leadership and positive industry dynamics. As the cloud and AI drive demand for bandwidth across the network, we are positioned for growth.” Rapid revenue and market share expansion moving forward.”
Ciena delivers the knockout punch with strong upside trends
Ciena MarketRank™ Stock Analysis
- Total MarketRank™
- 91st percentile
- Analyst evaluation
- Moderate purchase
- Upside/Downside
- 12.4% negatives
- Short interest level
- correct
- Earnings power
- nothing
- Environmental outcome
- -0.77
- News feelings
- 0.77
- Insider trading
- Selling shares
- project. Earnings growth
- 61.06%
See full analysis
They then proceeded to issue bullish guidance for the first quarter of 2025 and full fiscal year 2025. Fiscal first-quarter revenues are expected to be between $1.01 and $1.09 billion versus the consensus estimate of $1 billion. Full-year 2025 fiscal revenues are expected to rise 8% to 11%, or $4.34 billion to $4.46 billion, from $4.31 billion. This is a huge jump from the 0.5% year-over-year revenue decline in the fourth quarter of 2024. This marks the fourth quarter as a turning point.
Ciena also raised its long-term average annual revenue growth for fiscal years 2025 to 2027 to a range of 8% to 11%, up from the previously expected range of 6% to 8%. The company is confident enough in moving forward with its business that it has introduced an updated set of long-term goals driven by strong CapEx investments by cloud service provider customers, and they continue to invest in networks to help support AI training and inference.
The AI boom goes beyond the data center, impacting all areas of the network
Ciena expects an adjusted operating margin of 15% to 16% for fiscal 2027. Ciena stressed that AI is not just a data center phenomenon. Traffic flows from the data center to affect all areas of the network. Service providers inevitably need to upgrade their networks to Ciena’s next-generation smart line systems. Service provider orders exceeded revenue in North America for the first time in two years in the fourth quarter.
Ciena’s clients include major expanders such as Microsoft Corporation Nasdaq: MSFT azure, Amazon.com Inc Nasdaq: AMZN Os and Alphabet company Nasdaq:Google Google Cloud for media giants like Walt Disney Company New York Stock Exchange: Dis and Netflix company Nasdaq:NFLX And major telecommunications companies such as AT&T company New York Stock Exchange: T and Verizon Communications Company NYSE:FZ.
CIEN stock is trying to break through the bull flag
The bull flag pattern consists of two parts. First, the underlying stock forms a flagpole, which is a sharp rise in the price of a stock, usually at an angle of 45 degrees or higher. The flagpole is complete when the arrow forms its peak. The flag is formed on parallel downtrend lines consisting of lower highs and lower lows. A bull flag is triggered when a stock rises through the upper downtrend line and crosses the peak of the flagpole.
CIEN gapped up to $82.00 after its Q4 2024 earnings conference call to form gap-filling levels of $73.87 and $82.00. CIEN continued to rise over the next two days, reaching a flagpole peak of $91.82. The flag was formed on the parallel downtrend lines with a flat catalyst to the upside on the break above $87.60. VWAP daily support rises at $80.27. The daily RSI is slowly rising at the 68 range. Fibonacci Pullback support (Fib) levels are located at $83.64, $79.49, $76.55, and $73.47.
The average consensus target price for CIEN is $92.45Which means a decrease of 11.88% The analyst’s highest target price is at $98.00. It has seven buy ratings and six hold ratings. The stock has a short interest of 4.41%.
Actionable options strategies: Bullish investors can wait for CIEN to pull back and consider using cash-secured sell-offs at Fibonacci retracement support levels to buy the dip. If allocated to stocks, writing covered calls at rising Fibonacci levels implements a wheel strategy for income opportunities while hedging the downside through the premium received.
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