09:22 ET Ciena (CIEN) 58.90: Cisco's revenues fell 30% sequentially in the Mar qtr; Ciena's revenues rose 20% sequentially in the Apr qtr. Clearly, an ebbing tide does not sink all ships. But while Ciena's performance has been truly awesome given the harsh environment for companies who sell to telecom carriers, this Ciena report also highlights the risk we noted yesterday inherent in Ciena's high valuation. In terms of past results, you can only say good things about Ciena. It has posted sequential revenue growth of 20% or better for five straight quarters, and even saw a slight increase in gross margin to 45.6% from 45.5% in the latest quarter. This strong performance is the result of Ciena's excellent product positioning. It has taken an early lead in the optical switching market, offers DWDM solutions for both the long haul and the now-stronger metro market, and will be one of the few companies offering a combined switching/transport solution for the metro. In short, it has correctly anticipated where the market was headed, and has been very effective in meeting market demands with its internal R&D and acquisitions. So why is Ciena trading slightly lower to 58.50 right now pre-market? Because with a forward P/E of roughly 50, there is no margin for error, and there was one notable negative in the call that exposed a potential risk for Ciena. The company noted that it has seen at least one competitor resort to "desperate" pricing tactics, and that it expects others to become similarly desperate given the tough market environment. As a result, Ciena expects gross margins to fall by 100 bp in the July qtr. The pricing pressure is being seen primarily in the long haul transport (DWDM) part of Ciena's market, rather than optical switching. Unfortunately, long haul transport still represents the vast majority of Ciena's business -- optical switching is roughly 10% as is metro transport. The bottom line: Ciena has done a tremendous job in a very difficult environment, but the market had already rewarded the company with a rich valuation as a result. The lower gross margin and slightly lower July qtr EPS guidance ($0.15-0.18 vs $0.18 consensus) resulting from pricing pressures is the first evidence that Ciena is not immune to overall telecom weakness, and its rich valuation is being challenged as a result. Ciena still deserves a valuation premium versus its peer, as it is clearly gaining market share, but today's talk of pricing pressure suggests that the premium should not be getting any larger at this time. - Greg Jones, Briefing.com
09:20 ET ******
Morning Movers : The marketplace enjoyed a strong move to the upside yesterday with new recovery highs established in both the Dow and the S&P 500. While the Nasdaq is lagging in terms of achieving the same feat, early pre-market trading suggested a strong follow would develop in the wake of the well received earnings report from Ciena (CIEN 58.90). However, after rising nearly 5 points higher in pre-open action CIEN pushed into negative territory which has contributed to the reversal in the market averages. News that it has guided down gross margins due to "desperate" pricing measures by some of its competitors appears to have led to the slide. From a positive standpoint, the 11% surge off yesterday's low has given the stock considerable cushion before any chart damage of importance is noted. Trading is likely to be volatile today with initial support in the 58/57 area. On the upside, there is a minor congestion area in the 60.50/61 area with a more important near term ceiling at 63.50. This represents and a series of lows from the Feb/March period. Corvis (CORV 7.27) is in the same space and is still indicated to open better than 2% higher. The key for this stock from a chart perspective are the 20 and 50 day simple ma at 7.6. These barriers have capped the upside for the last week. On the downside is Credence Systems (CMOS 24.76) which fell shy of its Q2 number and stated it has seen a dramatic down turn in business over the last six months. It is currently indicated to open 9% or 2.2 points lower. This puts its 50 day simple ma at 22.4 under the gun with a penetration exposing its near month long trading range floor between 21.69 and 21.35. -- Jim Schroeder, Briefing.com
07:24 ET ******
Lucent (LU) 9.73: We have been contacted by a local television station in the Boston area that would like to interview an individual investor who lost money in Lucent. You must have invested prior to Lucent's restatement of earnings. If you would like to be interviewed on television, and, preferably, live in the Boston area, please send an email to us at Briefing.com, at Robert V. Green at rvgreen@briefing.com. Please include a brief description of your investment scenario. We will forward your request on to the television station directly, who will contact you directly. Briefing.com is not participating in the editorial direction of this story and is only providing an opportunity to our readers to participate.
19:12 ET ****** 16-May-01
Ann Taylor (ANN) 36.40: For Q1, ANN posted a net profit of $0.37 per diluted share, $0.03 ahead of the First Call consensus estimate, on a 10.8% increase in sales to $307.09 mln. Comparable store sales declined 3.5% in the quarter. By division, they were down 4.8% for Ann Taylor stores and up 4.9% for Ann Taylor Loft stores. Management was particularly encouraged by the performance of the Loft division, too, since it was highlighted by full-price selling of newer product in the latter part of the quarter-- a good indication, they believe, since the newer product reflects ANN's merchandising strategy going forward. Ann Taylor stores still felt the pinch of an over assortment of fashion-forward styling, but it was appeasing to hear that the division ended Q1 in a clean inventory position, and that management is confident the company will have an appropriate balance in fashion styles for Q3 and Q4 that will help it continue to win back its core customer. Suffice it to say, it was also appeasing to hear the company's EPS guidance of $0.28-$0.32 for Q2 (consensus is $0.29) and $2.24-$2.28 for FY01 (consensus is $2.08). That positive guidance, along with soft comparisons in coming months, the Fed's easing actions, an impending tax cut, and a sense that ANN is back on top of its fashion game now that it has re-focused its merchandising efforts on the classic styling that became its trademark, are among the more compelling reasons why Briefing.com continues to like ANN at these levels. Our initial price target is $40, but penetration of that level on heavier than average volume should open the door for a re-test of the stock's 52-wk high at 44.875.-- Patrick J. O'Hare, Briefing.com
18:18 ET ****** 16-May-01
Wednesday After Hours Price changes vs 4 pm ET levels: The number of reports is decreasing but earnings are the still the focus. On the plus side was CacheFlow (CFLO 9.25 +0.85) which beat Q4 by $0.04; expects flat Q1 but after hours traders centered in on projection of 10%-15% growth thereafter. Competitors INKT, AKAM, NTAP all posting gains in after hours trade. Hewlett-Packard (HWP 27.90 +1.16) also beat its estimate by $0.01; comfortable with Q3 estimate but cited economic deterioration/uncertainty as reason for "broadening" (lowering) its revenue target. Advances amid positive comments on conference call (considers Q3 clearly a tough quarter and also sees signs of real progress). On the downside was Lam Research (LCRX 30.22 -1.43) which announced that it plans to sell $200 mln of five-year convertible subordinated notes. Negative earnings were report by Credence Systems (CMOS 22.01 -2.75) which fell shy of its Q2 estimate by $0.08. Company stated that business has turned down dramatically in the past two quarters. Competitors include TER and A. Other issues surpassing their quarterly estimates were ANN and VCNT with TWMC and NIKU in line with expectations. For additional details on these, and other stories, be sure to visit Briefing.com's Short Stories and Earnings Calendar pages... Currently, the S&P futures are at 1291, 3 points above fair value while the Nasdaq 100 futures are at 1908, 2 points above fair value. -- Jim Schroeder, Briefing.com |
