Hi mcweazy,
Got my whisper sites mixed up. I wasn't familiar with that one, but yeah, you're right. They're predicting $0.11, vs. consensus $0.12. If CIEN misses and reports $0.11 as they are predicting, might that be accompanied by yet another forward earnings warning?
If so, I think CIEN would make an excellent short, and might even make an excellent short if they meet estimates.
The evidence, pro and con, as I see it:
1. P/E is exhorbitant relative to its peers, at over 500; CIEN's valuation has not been corrected yet, so it is overdue, making downside potential great.
2. CIEN is covered by 22 analysts, 91% of which [20/22] currently rate CIEN a "moderate buy" or "strong buy." There have been only two changes in analyst opinion since May, both upgrades.
biz.yahoo.com
So my take is there is a lot of room here for downgrades, which would only add wind to the downside sails. That said, I wouldn't hold my breath waiting for downgrades until CIEN is very close to a bottom, unless they miss estimates. There have been virtually no downward EPS revisions in regards to forward earnings, despite the earnings slowing of others in the same sector.
biz.yahoo.com
If the EPS comes in at $0.11, then sequential quarterly earnings growth would be 300%, 67%, 80%, and 22% for the last four quarters beginning with the quarter following the one in which CIEN first became profitable. If you take this last figure of 22% (based upon $0.11 this quarter) and extrapolate forward four quarters, you get 2001 earnings of $0.13, $0.16, $.20, and $.24, which roughly approximates the current projection for 2001 of 104% earnings growth, only if this last quarter's earnings growth continues linearly throughout 2001......a dubious projection at this point, I'd say, and quite open to argument.
3. Short interest is fairly small, approximating about one day's trading volume, making the potential for a short squeeze adding upside momentum remote.
4. The current 3-month open interest put/call ratio for CIEN is 0.63, which is in line with the market in general [21-day moving average of the equity put/call now stands at .57], and reasonable for CIEN in particular at this time. This put/call is higher than 75% of the daily put/call readings for CIEN this year, but this is reasonable because CIEN is coming off a 52-week high about one month ago. So, I don't think you can say that CIEN has either an excessively bullish or bearish indication from options speculator sentiment. There is, however, enormous clustering of puts at the 95 strike, amounting to about 10,000 contracts. This will tend to serve as support, but the amount of shares controlled by these contracts is roughly 1 million shares, which pales in comparison to the 10 day average daily volume of 12 million shares for CIEN. So, I don't see a major contibution either way, bullish or bearish, for CIEN from the options pits.
5. On the chart, CIEN sold off immediately after hitting a 52 week high about a month ago. There was a professional gap on 3 times normal volume two days in a row, amounting to a total volume of close to 80 million shares. After that, the volume profiles show decreasing volume as CIEN attempted to trade up, and increasing volume as it sold off, and it has failed to fill the gap, and in fact formed two lower lows, and two lower highs after this gap formed. It has traded now into the space between the 200 DMA and the 100 DMA, a region visited only briefly 4 times in the last year. But because the moving averages are still upsloping, and CIEN is still trading above the 200 DMA, it is premature to say that CIEN is now in a downtrend, IMHO. That said, the topping formation, professional gap, and the lower highs and lower lows, together with the inability thus far to fill that gap, are all most consistent with the beginnings of an extended downtrend beginning for CIEN, and I consider it very likely that CIEN will now follow other similar stocks and do just that.
stockcharts.com[L,A]DBCLNYMY[DC][PB25!B50!B100!B200!F][VC60][IUC20!LB14!LF!LG!UA12,26,9!LJ[$SPX]]
At the moment, there are technical buy signals across the board:
askresearch.com
Also, CIEN is currently in the middle of the range between both the 10 day and 20 day Bollinger bands. It looks to me like the critical test for CIEN will come very soon with a challenge to overhead resistance at 105, which is where the 25 DMA and 50 day ema currently reside, both downsloping.
Bottom line: CIEN seems to be shaping up to be an excellent short, but it probably should be watched at this point. I would consider an entry if and only if the test at 105 failed, and there were candle, chart, and technical weakening evident, and the volume profiles were consistent with further failure. If in addition to this, CIEN misses on 12/7, then this is a no-brainer short IMHO. But if CIEN falls, it will have a long way to go, probably a fairly quick fall to 65, at which point I'd strongly consider an exit at the first evidence of stabilization if I were short.
As always, JMVHO...............
Walkingshadow |
