Ciena: Recent dip suggests year-end profit-taking

Posted Nov 25th 2009 3:10PM by Joseph Lazzaro
Filed under: Ciena Corp (CIEN), Stocks to Buy

Ciena Corp.'s (CIEN) stock has underperformed since the May 19, 2009 Buy recommendation at $11.27, but I'm sticking with the shares. Here's why:

Much of the selling in broadband/bandwith play CIEN's shares has occurred ahead of its December 10 Q4 earnings report, and given that CIEN is likely to post year-over-year improving results despite a loss for the quarter, the selling suggests that some short-term institutional investors (IIs) are taking profits 'ahead of the quarter, ahead of the pack.' Keep in mind that Ciena traded at/near $5 earlier this year.

The First Call FY2009/FY2010 EPS estimates for CIEN are a loss of 46 cents to a profit of 10 cents.

Technically, Ciena's stock chart remains in an uptrend; a push below $10 would invalidate that trend line. Ciena will be re-evaluated after its Q4 report in December. It's a difficult call, but given Ciena's sector and customer relationships - 25% of its business is with AT&T (T) – the move lower is still viewed as year-end profit taking.

Stock Analysis: Ciena Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CEIN now. Under any circumstance, don't buy more than 50% of your CIEN position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $9.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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Reader Comments (Page 1 of 1)

11-26-2009 @ 12:28PM

Jennifer Dajo said...

The SEC may be finally doing something proactive. Just read SEC requested a copy of STOCK SHOCK--new movie about market manipulation and naked short selling of Sirius XM stock (among others). Amazon has the movie on DVD.