Ciena shares rise after earnings fall: turning point? News ad

Just as a stock can gap and crash on its earnings report, meaning the price initially rises at the market open and falls back into the red as the day progresses, stocks can also do the opposite: reset and gap. This was the case for a leading optical networking solutions provider. Siena Company New York Stock Exchange: CIEN following the release of fourth-quarter fiscal 2024 earnings.

Shares of the computer and technology giant initially fell from $73.21 to $67.01 in after-hours trading but turned around and rose to $82.00 in the morning’s break. The price action pleased investors and caused short sellers to panic as they tried to cover their losses as the stock continued to rise to a high of $91.82 in the following days. Let’s look at why the situation has changed and what it means for the company moving forward.

Headline: Q4 2024 EPS numbers and performance were worse than last year

Ciena’s fiscal fourth-quarter 2024 fundamentals were disappointing and triggered an initial sell-off. Ciena reported earnings per share of 54 cents, 11 cents below the consensus estimate. Revenue fell 0.5% year over year to $1.12 billion, slightly above the consensus estimate of $1.1 billion. Adjusted gross profit fell 210 bps. up to 41.6%. Operating expenses increased to $400.8 million from $395 million. Operating margin fell by 280 bps. YoY to 5.3%.

In other words, Ciena generated fewer sales at higher costs and earned less money than last year. By all accounts, the stock sell-off was justified.

Ciena took control of the narrative during the conference call

The stock market is always looking forward. This is true during earnings season, when companies report their past results and make recommendations for future results. By the time a company reports its quarterly results, the next quarter is already several weeks away. This is why thought leadership is so important. Sometimes a company will reserve its forecasts until it holds a conference call after explaining last quarter’s results.

In Ciena’s case, the company took control of the narrative by painting an optimistic view of its fourth-quarter results during a conference call.

The recovery of cloud computing, the rise of streaming services, 5G networks, the Internet of Things (IoT) and the boom of artificial intelligence (AI) ensure that data traffic will continue to grow exponentially. Thus, Ciena can benefit from increased spending on upgrading and expanding network systems. Demand for bandwidth is the lifeblood of Ciena’s business, growing at a 30% annualized rate for more than two decades.

This theme was echoed by Ciena CEO Gary Smith: “Our fourth quarter earnings and strong order flow reflect our significant and growing technology leadership and positive industry momentum. Equity expansion is moving forward.”

Ciena Delivers Knockout Punch With Strong Growth Forecast

They then proceeded to issue growth guidance for the first quarter of 2025 and the full year of fiscal 2025. First-quarter revenue is expected to be between $1.01 billion and $1.09 billion, versus the consensus estimate of $1 billion. In fiscal 2025, revenues are expected to grow 8% to 11%, or $4.34 billion to $4.46 billion, up from $4.31 billion. This is a huge jump from the 0.5% YoY decline in revenue in the fourth quarter of 2024. This signals that the fourth quarter was 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 a previously expected range of 6% to 8%. The company is so confident in moving its business forward that it has provided an updated set of long-term goals driven by strong capital investments from cloud service provider customers, and they continue to invest in networks to help support AI training and inference.

The AI ​​boom is expanding beyond the data center, affecting every area of ​​the network.

Ciena expected fiscal 2027 adjusted operating margins of 15% to 16%. Ciena emphasized that AI is not just a data center phenomenon. Traffic leaves the data center and affects all areas of the network. Suppliers will inevitably have to upgrade their networks to Ciena’s next generation of intelligent line systems. Service provider orders in the fourth quarter exceeded revenue in North America for the first time in two years.

Ciena’s clients include major hyperscalers such as Microsoft Company NASDAQ: MSFT Azure, Amazon.com Inc. NASDAQ: AMZN AWS and Alphabet Inc. NASDAQ: GOOGLE Google Cloud for media giants like Walt Disney Company. New York Stock Exchange: DIS And Netflix Inc. NASDAQ: NFLX and large telecommunications companies such as AT&T Inc. New York Stock Exchange: T And Verizon Communications Inc. New York Stock Exchange: ВЗ.

CIEN Stock Attempts Bull Flag Breakout

The bull flag pattern consists of two parts. First, the underlying stock forms a flagpole, which is a sharp jump in the stock’s price, usually at an angle of 45 degrees or greater. The flagpole ends when the stock reaches its peak. The flag is formed on parallel descending trend lines consisting of lower highs and lower lows. A bull flag is triggered when the stock breaks the upper downtrend line and passes the top of the flagpole.

CIEN triggered a gap to $82.00 following the 2024 Q4 earnings call, generating gap fill levels of $73.87 and $82.00. Over the next two days, CIEN continued to rise, peaking at $91.82. The flag formed on parallel descending trend lines with a bullish flat on a break above $87.60. Daily VWAP support rises to $80.27. The daily RSI is slowly rising at the 68 band. Fibonacci (Fib) pullback support levels are at $83.64, $79.49, $76.55 and $73.47.

CIEN’s average agreed price is $92.45which implies a downside potential of 11.88%. and his highest analyst price target is at US$98. It has seven buy ratings and six hold ratings. The short interest on the stock is 4.41%.

Actionable Option Strategies: Bullish investors may want to wait for CIEN to pull back and consider using cash-backed puts at Fibonacci retracement support levels to buy the dip. If the stock is allocated, then writing covered calls at high Fibonacci levels implements a wheel strategy for income opportunities while hedging the downside with the premium received.

Before you consider Ciena, you’ll want to hear this.

MarketBeat tracks Wall Street’s top-rated and best-performing analysts daily and the stocks they recommend to their clients. MarketBeat identified five stocks that top analysts were quietly telling their clients to buy now, before the broader market caught on… and Ciena wasn’t on the list.

While Ciena currently has a Moderate Buy rating among analysts, the top-rated analysts think these five stocks are Strong Buys.

View five stocks here

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