Ciena stock price is in a Falling Wedge pattern that is setting up for a good swing long trade on a breakout.

Ciena is a network strategy and technology company, which provides products and services that enable a range of network operators to adopt communication architectures and deliver an array of services, relied upon by enterprise and consumer end users. It provides equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks.

On September 5, 2019, Ciena announced financial results for its fiscal third quarter ended July 31, 2019.

Ciena Earnings Highlights

  • Q3 Revenue: $960.6 million, increasing 17.3% year over year
  • Q3 Net Income per Share: $0.55 GAAP; $0.71 adjusted (non-GAAP)
  • Share Repurchases: Repurchased approximately 1.1 million shares of common stock for an aggregate price of $45.4 million during the quarter

“We delivered another quarter of outstanding financial results as we benefit from our strong competitive position within the industry and continue to gain market share,” said Gary Smith, President and CEO, Ciena. “Looking ahead, fiscal 2019 will be an extraordinary year for Ciena, including substantial revenue growth and increased profitability.”

For the fiscal third quarter 2019, Ciena reported revenue of $960.6 million as compared to $818.8 million for the fiscal third quarter 2018.

During the earnings conference call, Ciena said that it sees Q4 revenue of $945M-$975M. The consensus was for $956.19M.

Management said they have never been more confident in their ability to continue to take market share and expect to grow revenue in FY20 at a rate of roughly double that of current expectations for market growth, which is in the low single-digits. Management notes that performance is consistent with current consensus revenue expectations for FY20. Management clarified that to be a rate of 6%-8% during the question and answer segment of the call. Management notes they have “increased confidence” in the company’s ability to achieve the 15% operating margin target in FY20 and drive “meaningful EPS growth.” Management will provide additional detail on FY20 during the Q4 earnings call in December. Management said FY19 will be “extraordinary” year for Ciena, marked by “significant” market share gains as the company advances its competitive position and drive “double-digit revenue growth and increased profitability.”

On September 6, 2019, Piper Jaffray said that Ciena continues to execute well after reporting “impressive” July quarter results, beating consensus estimates across the board, Piper Jaffray analyst Troy Jensen told investors in a research note. North America continues to drive the upside, and the company is also continuing its momentum in 400G, says the analyst. However, Jensen remains cautious on the shares, noting the competitive environment around 600G offerings and tough year-over-year comps in 2020. The analyst raised his Ciena stock price target to $46 from $45 but keeps a Neutral rating on Ciena.

Also on September 6, 2019, Barclays analyst Tim Long raised Ciena stock price target to $53 from $50 saying the company’s July quarter results exceeded expectations while revenue guidance was only in-line. Any near-term weakness in the shares presents an attractive entry point as Ciena continues to take market share in a growing optical segment, Long tells investors in a research note. Further, its operating margins are expanding, the guidance is conservative, and the stock’s valuation is attractive, argues the analyst. He keeps an Overweight rating on Ciena.

Also on September 6, 2019, Stifel analyst John Marchetti said Ciena delivered strong Q3 revenues with meaningful margin and EPS upside. However, its “flattish” outlook for Q4 and reiteration of its long-term 6%-8% revenue growth outlook sent shares lower. He sees the pullback as presenting a buying opportunity, as he views the outlook as conservative, particularly for FY20, Marchetti said. He expects additional market share gains amid customer spending increases in support of 400G/800G adoption and preparation for 5G deployments and reiterated a Buy rating with a Ciena stock price target of $54.

Finally, on September 6, 2019, MKM Partners analyst Michael Genovese lowered his Ciena stock price target to $51, saying the company posted a “clean” Q3 earnings beat, but its Q4 guidance was “only slightly” ahead of expectations. The analyst still keeps a Buy rating on the stock however and believes that the positives outweigh the negatives, with the quarter showing “strong” year-to-date book-to-bill above 1.0 and a rising backlog. Genovese adds that he is positive on the company’s leadership in 400G and 800G technology.

On September 6, 2019, in after-hours trading, dark pool activity was detected in CIEN stock.

CIEN stock in the 1-minute time frame showing two dark pool prints at $39.52 on September 6, 2019.
Ciena stock price on the 1-minute chart and the dark pool orders on September 6, 2019.

The dark pool prints look like buy orders based on how the Ciena stock price traded immediately following the dark pool prints.

The dark two dark pool prints each represented about 7.5% of the daily volume in CIEN stock. Together, the two dark pool prints accounted for 15% of the daily volume in the stock.

The daily chart shows CIEN stock near major support which further bolsters the case that the dark pool prints were buy orders.

Ciena stock price is in a Falling Wedge pattern on September 6, 2019.
CIENA stock price in the daily time frame shows the stock trading in a Falling Wedge pattern. A breakout of the Falling Wedge pattern would likely send the stock back to test $46.78.

Notice the positive divergence between price and the Twiggs Money Flow on the daily chart:

Twiggs Money has been rising since the end of August as Ciena stock price has fallen.

We are not adding CIEN stock to the long-term buy and hold GST Portfolio at this time. We will watch Ciena stock price for a breakout of the Falling Wedge before taking a long entry. The idea is that we don’t want to try and catch a falling knife if CIEN stock wants to go lower.

Disclosure: We do not hold any position in CIEN stock.

Ciena Corporation In the News