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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: A.L. Reagan who wrote (9689)	10/21/2000 12:10:07 AM
From: cfoe	Respond to of 12623

Al - I took the following assumptions: Revenue growth rate for each of the next two years = 75% After tax profit margin of 20% P/E at end of 2nd year = 150 (less than 2x avg 5-year projected growth of 87% per SI Ciena Profile - Financials) And got the following results: At the end of the second year the per share price is between $184 and $232 (using two related but different methods) and the market cap is between $52 and $66 billion. This is based on the current number of shares outstanding. If I carry this out for 5 years with the 87% 5-year growth, 25% profit margin and end of 5th year P/E of 40, the stock price would be between $325 and $577, and the market cap between $92 billion and $164 billion. Note that revenues in years two and five (using both approaches) are $2.2 billion and $16.3 billion respectively. FWIW, the equation I used to derive these results came from a nationally recognized expert in portfolio management theory, who developed it earlier this year to do valuation analysis on internet stocks. (Needless to say he came away with the conclusion they were all over-valued.) I also had the way I used the formula checked out by an engineering colleague (given I ma a dunce with this higher math stuff). Saying all this only by way of disclosure; not to lend any weight to the result.

To: A.L. Reagan who wrote (9689)	10/21/2000 9:32:07 AM
From: James Fulop	Read Replies (1) \| Respond to of 12623

>>At what CIEN price, say now through next 12 months, would you be concerned from a valuation standpoint about your investment? Or do you just hold until there's a stumble?<< Until there is a stumble. Which is why doing DD on Ciena is a never ending project with me. >>What is needed is for some of the newer long-haul networks to scale back their (so-far) ambitious expansion plans.<< Unlike some of its start-up competitors, Ciena is in a number of different areas of the optical space, so if indeed there is a "scale back" by some of the carriers in long-haul, newer areas such as metro and switching just might pick up the slack. >>the marginal carriers will be redoing their revenue models, and cutting capex, and then the whole thing begins to slow.<< If the slowdown in capex is parallel with the spending on Ciena's products, I would agree. (Although I still have my doubts about this capex slowdown.) But there is the possibility that within the mix of capex, the higher priority segment that Ciena caters to may actually be increasing while the overall pie decreases. Of course that is only my conjecture.

To: A.L. Reagan who wrote (9689)	10/21/2000 1:37:27 PM
From: mact	Read Replies (1) \| Respond to of 12623

Like everything in life, it's all timing, and right now this baby looks way too hot to short. What is needed is for some of the newer long-haul networks to scale back their (so-far) ambitious expansion plans. ALR, agree that a short position in CIEN not a wise move at this point...CIEN held up remarkably well despite the recent nazzy selloff and earnings restatement secondary to a deadbeat telecom co. not paying them...we are probably just starting a 2-3 month broadbased rally and i wouldnt be surprised to see CIEN into the 200's within the month...as for telecom co's scaling back, i do not see this happening to a significant degree...co's like broadwing, williams and qwest will most likely lay people off(which qwest has already done) rather than scale back on purchases...they do this as their future depends on broadband data based services and they must ramp up if anything deploying fiber to compete and execute their plans...their futures depend on building out the infrastructure. mact