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Weekly Option Windfall: AI Communications Giant Flexes 30% Profit Potential
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Ciena Corporation, a Zacks Rank #1 (Strong Buy), has seen its shares surge this year as the company benefits from an accelerating transformation driven by artificial intelligence and explosive demand for networking solutions. Ciena is a global technology provider of hardware, software, and related services for network operators.
The stock has broken out to a multi-decade high in 2025 on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
Ciena is part of the Zacks Communications - Components industry group, which currently ranks in the top 13% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months, just as it has throughout the year:
Image Source: Zacks Investment Research
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics. They are also projected to experience above-average earnings growth, which signifies a powerful combination that should lead to higher prices in the future.
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
In a year where artificial intelligence has reshaped the technology landscape, few companies have captured the momentum quite like Ciena. The networking specialist, a standout in the Zacks Communications - Components industry, has witnessed its shares surge more than 140% year-to-date, significantly outperforming both the broader market and its peers.
The catalyst for the bullish move? Explosive demand for high-speed optical networking solutions driven by AI infrastructure buildouts and cloud expansion. The company's innovations in coherent optics and photonic solutions position it at the heart of the multi-year AI networking cycle, where hyperscalers and service providers invest heavily to support data-intensive applications.
Its optical systems, software, and services power data transmission for telecom providers, cloud companies, and governments, with a primary focus on developing adaptive, AI-ready networks for massive bandwidth demands. Ciena specializes in high-speed connectivity, optical transport, routing, switching, and network automation, helping its clients manage data for 5G, broadband, and data centers.
Earnings Trends and Future Estimates
What stands out is Ciena's consistent ability to deliver positive earnings surprises. Over the last twelve quarters, Ciena has missed the EPS mark just twice. The company delivered a trailing four-quarter average surprise of over 22%, reflecting strong execution in converting AI-driven demand into results. This track record aligns perfectly with the power of the Zacks Rank system, which prioritizes stocks showing upward earnings revisions.
Ciena's transformation has been remarkable. The company reported fiscal fourth-quarter results just last week that exceeded expectations, with adjusted EPS of $0.91 beating the Zacks Consensus Estimate by 18%. Revenue of $1.35 billion topped forecasts by nearly 5% while growing 20% from the year-ago period. Management highlighted record orders, a $5 billion backlog, and market share gains in optical networking, particularly among cloud providers now representing a larger mix of sales.
The Maryland-based company has been the beneficiary of improving earnings estimate revisions as of late. Looking into the current quarter, analysts have raised their fiscal Q1 2026 EPS estimates by 39.47% in the past 60 days. The Zacks Consensus Estimate now stands at $1.06 per share, reflecting better than 65% growth relative to the same period in the prior year. Revenues in the current quarter are projected to climb nearly 30% to $1.39 billion.
Image Source: Zacks Investment Research
Option Essentials
While there are many ways to take advantage of a bullish move in CIEN stock, options provide us with flexibility, enabling us to tailor our strategy to the current market environment.
When done correctly, trading options provides huge profit opportunities with limited risk making options one of the most versatile investment vehicles.
Before we analyze today’s trade, let’s review some option fundamentals as a refresher. There is no need to worry about complex mathematical formulas or equations. Over the years I’ve found that the more complicated a strategy is, the less likely it is to work over the long run.
Options are standardized contracts that give the buyer the right – but not the obligation – to buy or sell the underlying stock at a fixed price, which is known as the strike price. A call option gives the buyer the right to buy a particular security, while a put option gives the buyer the right to sell the same. The investor who purchases an option, whether a put or call, is the option buyer, while the investor who sells a put or call is the seller or writer.
These contracts are valid for a specific period of time which ends on expiration day. There are weekly options, monthly options, and even LEAPS options which are longer-term options that have an expiration date of greater than one year.
Option spreads can be an extremely effective strategy. Debit spreads are implemented by purchasing a call option and selling a related call option with a higher strike price. These types of trades are limited risk trades because the short option is ‘covered’ by the option purchase.
Below we’re going to explore a call option spread strategy.
The Power of Option Spreads
Ciena (CIEN - Free Report) has been outperforming over the past year and currently meets our criteria for initiating a bullish call option spread position. The company is witnessing positive earnings estimate revisions, which our research has shown to be the most powerful force impacting stock prices.
Image Source: StockCharts
The table below displays the risk/reward profile for this trade. CIEN is trading at $210.71/share at the time of this writing. This trade involves purchasing the January 175-strike call at 38.9 points (yellow box), and selling the January 185-strike call at 31.2 points (orange box) for a total cost of 7.7 points. As option contracts represent 100 shares of the underlying security, this would translate to a total cost of just $770 per spread (brown box).
Image Source: Zacks Investment Research
The top (blue) row in the lower section shows the performance of CIEN stock based on different percentage scenarios at expiration. The last (purple) row shows the corresponding percentage return for our debit spread trade. We can see that regardless of whether CIEN increases in price, remains flat, or even loses 10% from our entry, our option spread trade will produce a 29.9% return.
Remember that the call option sold through this strategy profits as the price of the underlying stock declines, providing us with a cushion during market pullbacks.
Option spreads are a safe way to use the leverage inherent in options. Your risk is limited to the price paid for the spread. The call option spread strategy is an excellent way to take advantage of the bullish move in Ciena as the stock looks primed to continue its outperformance.
Bottom Line
Currently, Ciena carries a Zacks Rank #1 (Strong Buy), driven by favorable estimate momentum heading into fiscal 2026. Analysts project robust growth, with guidance implying mid-20% revenue expansion and continued margin improvement from scale and mix benefits.
Solid institutional buying should continue to provide a tailwind for the stock price. The Zacks Communications - Components industry itself ranks in the top tier, benefiting from structural tailwinds like fiber densification and data center interconnects. Ciena's leadership here, combined with its earnings beat streak and positive revisions, makes it a compelling choice for investors seeking exposure to AI's ongoing infrastructure boom.
As someone who has followed networking stocks through multiple cycles, it's encouraging to see Ciena not just riding the wave but helping build the foundation for tomorrow's connected world.
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Weekly Option Windfall: AI Communications Giant Flexes 30% Profit Potential
Ciena Corporation, a Zacks Rank #1 (Strong Buy), has seen its shares surge this year as the company benefits from an accelerating transformation driven by artificial intelligence and explosive demand for networking solutions. Ciena is a global technology provider of hardware, software, and related services for network operators.
The stock has broken out to a multi-decade high in 2025 on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
Ciena is part of the Zacks Communications - Components industry group, which currently ranks in the top 13% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months, just as it has throughout the year:
Image Source: Zacks Investment Research
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics. They are also projected to experience above-average earnings growth, which signifies a powerful combination that should lead to higher prices in the future.
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
In a year where artificial intelligence has reshaped the technology landscape, few companies have captured the momentum quite like Ciena. The networking specialist, a standout in the Zacks Communications - Components industry, has witnessed its shares surge more than 140% year-to-date, significantly outperforming both the broader market and its peers.
The catalyst for the bullish move? Explosive demand for high-speed optical networking solutions driven by AI infrastructure buildouts and cloud expansion. The company's innovations in coherent optics and photonic solutions position it at the heart of the multi-year AI networking cycle, where hyperscalers and service providers invest heavily to support data-intensive applications.
Its optical systems, software, and services power data transmission for telecom providers, cloud companies, and governments, with a primary focus on developing adaptive, AI-ready networks for massive bandwidth demands. Ciena specializes in high-speed connectivity, optical transport, routing, switching, and network automation, helping its clients manage data for 5G, broadband, and data centers.
Earnings Trends and Future Estimates
What stands out is Ciena's consistent ability to deliver positive earnings surprises. Over the last twelve quarters, Ciena has missed the EPS mark just twice. The company delivered a trailing four-quarter average surprise of over 22%, reflecting strong execution in converting AI-driven demand into results. This track record aligns perfectly with the power of the Zacks Rank system, which prioritizes stocks showing upward earnings revisions.
Ciena's transformation has been remarkable. The company reported fiscal fourth-quarter results just last week that exceeded expectations, with adjusted EPS of $0.91 beating the Zacks Consensus Estimate by 18%. Revenue of $1.35 billion topped forecasts by nearly 5% while growing 20% from the year-ago period. Management highlighted record orders, a $5 billion backlog, and market share gains in optical networking, particularly among cloud providers now representing a larger mix of sales.
The Maryland-based company has been the beneficiary of improving earnings estimate revisions as of late. Looking into the current quarter, analysts have raised their fiscal Q1 2026 EPS estimates by 39.47% in the past 60 days. The Zacks Consensus Estimate now stands at $1.06 per share, reflecting better than 65% growth relative to the same period in the prior year. Revenues in the current quarter are projected to climb nearly 30% to $1.39 billion.
Image Source: Zacks Investment Research
Option Essentials
While there are many ways to take advantage of a bullish move in CIEN stock, options provide us with flexibility, enabling us to tailor our strategy to the current market environment.
When done correctly, trading options provides huge profit opportunities with limited risk making options one of the most versatile investment vehicles.
Before we analyze today’s trade, let’s review some option fundamentals as a refresher. There is no need to worry about complex mathematical formulas or equations. Over the years I’ve found that the more complicated a strategy is, the less likely it is to work over the long run.
Options are standardized contracts that give the buyer the right – but not the obligation – to buy or sell the underlying stock at a fixed price, which is known as the strike price. A call option gives the buyer the right to buy a particular security, while a put option gives the buyer the right to sell the same. The investor who purchases an option, whether a put or call, is the option buyer, while the investor who sells a put or call is the seller or writer.
These contracts are valid for a specific period of time which ends on expiration day. There are weekly options, monthly options, and even LEAPS options which are longer-term options that have an expiration date of greater than one year.
Option spreads can be an extremely effective strategy. Debit spreads are implemented by purchasing a call option and selling a related call option with a higher strike price. These types of trades are limited risk trades because the short option is ‘covered’ by the option purchase.
Below we’re going to explore a call option spread strategy.
The Power of Option Spreads
Ciena (CIEN - Free Report) has been outperforming over the past year and currently meets our criteria for initiating a bullish call option spread position. The company is witnessing positive earnings estimate revisions, which our research has shown to be the most powerful force impacting stock prices.
Image Source: StockCharts
The table below displays the risk/reward profile for this trade. CIEN is trading at $210.71/share at the time of this writing. This trade involves purchasing the January 175-strike call at 38.9 points (yellow box), and selling the January 185-strike call at 31.2 points (orange box) for a total cost of 7.7 points. As option contracts represent 100 shares of the underlying security, this would translate to a total cost of just $770 per spread (brown box).
Image Source: Zacks Investment Research
The top (blue) row in the lower section shows the performance of CIEN stock based on different percentage scenarios at expiration. The last (purple) row shows the corresponding percentage return for our debit spread trade. We can see that regardless of whether CIEN increases in price, remains flat, or even loses 10% from our entry, our option spread trade will produce a 29.9% return.
Remember that the call option sold through this strategy profits as the price of the underlying stock declines, providing us with a cushion during market pullbacks.
Option spreads are a safe way to use the leverage inherent in options. Your risk is limited to the price paid for the spread. The call option spread strategy is an excellent way to take advantage of the bullish move in Ciena as the stock looks primed to continue its outperformance.
Bottom Line
Currently, Ciena carries a Zacks Rank #1 (Strong Buy), driven by favorable estimate momentum heading into fiscal 2026. Analysts project robust growth, with guidance implying mid-20% revenue expansion and continued margin improvement from scale and mix benefits.
Solid institutional buying should continue to provide a tailwind for the stock price. The Zacks Communications - Components industry itself ranks in the top tier, benefiting from structural tailwinds like fiber densification and data center interconnects. Ciena's leadership here, combined with its earnings beat streak and positive revisions, makes it a compelling choice for investors seeking exposure to AI's ongoing infrastructure boom.
As someone who has followed networking stocks through multiple cycles, it's encouraging to see Ciena not just riding the wave but helping build the foundation for tomorrow's connected world.