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The U.S. recession has hit just about every sector fairly hard, save health care; internet services have certainly not been immune.
Still, Wall Street has been known to overdo it somewhat on the downside, particularly when a growth play runs into a recession, and that's why Ciena Corp. (NASDAQ: CIEN) is worth a review.
Ciena supplies communications networking equipment, software and services to communications service providers, cable operators, governments and enterprises. The company specializes in helping organizations transition from old-world architectures to high-bandwidth services. Hence, CIEN is largely a broadband play, and now that it looks like better days are up ahead for the U.S. economy in a quarter or two, firms will begin to make the investments they need to stay competitive in a decidedly broadband world. The First Call F2009/F2010 EPS estimates for CIEN are a loss of 21 cents and a profit of 15 cents.
Other positives: Ciena has also implemented a round of cost cuts to address lower industry demand, and that should benefit shares as its clients' work load ramps back up heading into F2010.
The risks are obvious enough: a failure of the U.S. recession to bottom would discourage companies from making needed broadband investments, but these investments can only be postponed for so long if companies hope to meet the broadband demand that will surely increase with the next expansion.
Stock Analysis: Ciena Corp. is a high-risk stock. Don't Buy CIEN if you can not tolerate high risk. If you can, consider buying a 25% position in CIEN now, then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CIEN position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $4.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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