Ciena Target Lowered Again

Ciena Corp.’s (CIEN - Analyst Report) FlexSelect platform has been gaining momentum and we believe the acquisition of World Wide Packets will further strengthen Ciena’s base.

On September 4, Ciena announced results for the third quarter of 2008, ended July 31. Revenue for the quarter was $253.2 million, in line with our estimate, and included $223.7 million in product revenue and $29.5 million in services revenue. This was an increase of 23.5% from the $205 million reported in the third quarter of 2007, which included $182.1 million in product revenue and $22.8 million in services revenue.

However, for the third quarter, Ciena provided a bleak revenue outlook as a result of order delays from many of its Tier 1 service provider customers in addition to existing customer-specific challenges. Although we have yet to see this occur among its competitors, we believe this could be an industrywide phenomenon given CIEN’s July quarter end.

Ciena is currently trading at 13.0x our reduced 2008 EPS estimate, a discount to the industry median. The company significantly lowered its guidance for Q4. We maintain our Hold rating on CIEN shares and again lower our six-month price target to $13, given the uncertain macroeconomic conditions. This price is based on P/E multiple of 8.4x our reduced 2009 EPS estimate of $1.54.

Read the full analyst report on CIEN

Read the full analyst report on CIEN