This was posted on Yahoo. Like Hambrecht & Quist, and Robbie Stephens Goldman upgrades, downgrades and comments are known to make or break tech stocks (short term)!
I am long Ciena, and am a private client of Goldman, Sachs. Here is a copy of some analysis that GS
published that underlines how strong Ciena's core business is:
First, Ciena's business is healthy, even with the falloff in current Worldcom business. The January
quarter exceeded
estimates, with revenue growth of almost 150% and earnings growth of about 185% from last year.
Sales momentum apart from Worldcom is
clearly strong. In the October quarter, non-Worldcom business grew by about $11 million or 23% to
$57 million, we estimate. In the
January quarter non-Worldcom business grew by $32 million or 55% sequentially to $89 million. In the
April quarter, non-Worldcom
business is forecast to grow by about $38 million or 45% to $127 million. If Worldcom sales rebound
sharply in the fourth quarter, as
Worldcom expects, growth should be very strong as we exit the fiscal year.
Second, the customer base is diversifying rapidly. Revenue was booked from a half dozen customers in
the quarter, and tens of customers are expected within a couple of quarters.
Third, while there is no likely upside for the April quarter, there is plenty of room for upside later this
year from AT&T and others. Our new forecast shows AT&T sales at $87 million this fiscal year out of
$626 million. (Previously, we assumed $50 million out of $590 million total sales, but it is increasingly
clear to us that Ciena will be the dominant supplier of 16-channel systems into AT&T this year.)
Finally, the aftermarket valuation seems low; at $45, for example, the stock would be trading at only 25
times next fiscal year's earnings. We believe the top-line growth rate remains at least 40%. |
