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Investors Business Daily
Technology
PATRICK SEITZ

Ciena Stock Drops Amid Sales Slowdown In Key Market

Ciena stock plunged Tuesday after the maker of optical communications gear signaled a slowdown in business from cloud data centers. Ciena also missed estimates with its sales outlook for the current quarter and full year.

The Hanover, Md.-based company early Tuesday reported fiscal second-quarter results that beat Wall Street's targets on the top and bottom lines.

Ciena earned an adjusted 74 cents a share, up 48% year over year, in the quarter ended April 29. That's on sales of $1.13 billion, up 19%. Analysts polled by FactSet had expected earnings of 61 cents a share on sales of $1.09 billion.

However, for the current quarter, Ciena forecast sales of $1 billion to $1.08 billion, vs. Wall Street's consensus target of $1.1 billion.

For its fiscal 2023, it lowered its revenue outlook to 18-22% growth, vs. its prior target of 20-22% growth. Ciena said it is seeing some customers delaying delivery of orders, particularly among North American service providers.

Ciena Stock Tanks After Report

On the stock market today, Ciena stock tumbled 10.8% to close at 42.39.

Softer-than-expected sales to large internet service providers, or "web-scale" firms, overshadowed Ciena's second-quarter beat, JPMorgan analyst Samik Chatterjee said in a note to clients. Sales to web-scale firms fell 2% from the first quarter, he said.

"While aggregate performance is a positive, the sequential revenue moderation in web-scale is worth highlighting," Chatterjee said. "It could be indicative of weaker demand trends from the customer vertical, which has already been well telegraphed but could still raise additional concerns in relation to orders and subsequently growth next year."

Chatterjee rates Ciena stock as overweight, or buy, with a price target of 67.

Customers build Ciena's gear into telecom networks and hyperscale data centers. The company competes against Infinera and Cisco Systems.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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