Courtesy stockgenie99 on the Yahoo thread:
>>Our View:
CIENA's results were extremely positive and show growing traction with new
customers and new products.
As we have discussed over the past several weeks, we believe CIENA's new
customer is Qwest, which has been looking for a second source to Nortel
(NT/$123.44/BUY) for OC-192 products for the past several quarters. Qwest
has been testing products from both CIENA and Lucent (LU/$53.50/BUY) and
now expects to have CIENA's CoreStream installed in its network by the end
of the March quarter.
We believe Qwest's order (in addition to other recent CIENA contract
wins) provides significantly better visibility for CIENA going forward.
The increasing demand for CIENA's OC-192 product line, as well as Metro
DWDM, greatly increase our confidence in management's ability to meet or
exceed our estimates in 2000 and into 2001. CIENA is also showing very
good expense management, and we believe increased contributions from
CoreStream and other new products create the opportunity for continued
margin improvements going forward.
We continue to think the fundamentals driving CIENA's business are
very strong. Given these extremely strong quarterly results and our
bullish outlook for the optical market in 2000, we are taking our price
target to $150 from $100. Our new target assumes a 75 times earnings
multiple for CIENA's core long-haul DWDM business and a 60 revenue
multiple for the "emerging" optical portfolio (Metro and CoreDirector).
Thus we value CIENA's core business at $60 a share and the emerging
optical portfolio at $90. We think this valuation continues to be
conservative as CIENA's closest comp, Sycamore Networks
(SCMR/$122.50/BUY), currently trades at 110 times our 2001 revenue
estimate.
We would continue to be aggressive buyers of CIEN shares.
(J.P. Morgan has acted as lead or co-manager in an offering of securities
for LU, SCMR, and NT within the past three years. A director or senior
officer of J.P. Morgan is a director of LU. The analyst or research
associate holds a position in LU.)
First Call Corporation, a Thomson Financial company.
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