credit suisse was dead on cien as they dg one mos. ago warning of carrier cutbacks. that saved me as i sold 1/2.. here's their updgrade today.
CIENA Corp. (CIEN) Neutral P. Silverstein
CP: US$ 13.09 TP: US$ 12 CAP: US$ 1.4b
FY3Q08 Earnings Results, UPGRADING to NEUTRAL (from Underperform), Lowering Estimates and Target Price to $12 (from $17)
• Investment Thesis. Near-term, CIEN faces an ongoing challenging carrier capex outlook. Longer-term, CIEN retains a strong
competitive position in the next-gen optical infrastructure market, which should continue to benefit from network upgrades and
re-architecture by service providers being driven by Web-based video.
• Results. Rev/PF EPS (ex ESO) of $253.2mln/$0.37 v. our $253.0mln/$0.38 and Street consensus's $253.6mln/$0.37
estimates.
• Guidance. FY4Q08. Expects Rev/GM of approximately $190-210mln/mid-to-high 40s v. our $261mln/49.4% and consensus's
$264mln/51.8% previous estimates.
• CS Outlook/Valuation. We are slashing our already Street low rev and earnings estimates, lowering our 12mth target price,
but, with the revised disappointing outlook now out in the open, raising our rating to Neutral from Underperform. Our new $12
12mth price target (previously $17) is driven by applying a 1.0x EV/Rev multiple to our revised FY09 rev forecast and adding
back $286mln of net cash. On the one hand, we see no immediate catalyst to drive shares higher in the near-term given our
concerns regarding carrier capex. Moreover, we suspect that there may be additional downside to shares given the scale of
the disappointing FY4Q08 guidance and lack of visibility as to timing and scope of recovery. CIEN's misfire also highlights the
risk of relying on valuation based on current company guidance/Street forecasts when visibility is virtually nonexistent. On the
other hand, CIEN is still a leading supplier in one of the few growth pocket segments of the carrier infrastructure market. We
also do not believe that the current capex issues are analogous to the 2001 bubble period given that most carriers appear to
have shifted to a just-in-time success-based bandwidth provisioning model, with relatively limited equipment inventory.
Meanwhile, underlying bandwidth growth trends remain positive driven by web-based video, Telepresence and other high-def
enterprise video-conferencing systems, and increasing availability and use of true 3G wireless devices that are driving
incremental bandwidth on the wireline backhaul portion of wireless operators' networks.
• Estimates. Rev/PF EPS (ex-ESO) est.s revised as follows: FY08 to $923mln/$1.29 from $983mln/$1.55; and FY09 to
$850mln/$0.20 from $1.10bln/$1.16.
• Highlights. Challenging CapEx CIEN lowered FY4Q08 rev guidance to $190-210mln--significantly below our $261mln and
consensus's $264mln previous est.s--due to a challenging capex environment, with order delays, lengthening sales cycles
and slowing deployments. CIEN noted that expected weakness is broad-based across products, customers, and geographies.
Our checks indicate that AT&T is a healthy portion of the expected shortfall, which also contributes to expected lower FY4Q08
GM. |
