Technology Stocks

Ciena Corporation (NYSE:CIEN) Gaining Market Share As The Balance Sheet Strengthens

This year is particularly exceptional for Ciena Corporation (NYSE:CIEN). So far, the average performance for the firm’s share is +11.68%. This is an excellent range considering the erratic nature of the equities market this year. Interestingly, there is an apparent appetite in the market for the stock.

From success to success

It is no secret that Ciena is one firm jumping from success to success. Interestingly, the stock defied the two-month market-wide rout that began in late October. In particular, the share price is grossing above both the 200-day and the 50-day moving averages. These two establish support at 28.18 and 32.14 respectively.

However, with the 50-day support slight breached in the last two weeks of trades, it is likely the stock is weakening. Evaluating the stock’s strength at the moment is not easy since important indicators are neutral. For about one month, the RSI is oscillating about the 50-point zone which is the neutral zone. As such, it is not easy to tell whether the stock is gaining up or the opposite direction.


Strong figures

However, looking at the latest figures from the last earnings results indicate the stock could be a victim of market doldrums. In the Q4 2018 earnings, Ciena reported revenues of $899.4 million which is a 20.8% increase year-over-year. Further, the net income per share for non-GAAP earnings reached $0.53%. This is a strong performance which the management acknowledged.

According to Gary B. Smith, president, and CEO, Ciena, the quarter is one of their strongest. “We achieved outstanding financial results in our fourth quarter and fiscal 2018 due to continued execution of our proven strategy,” Smith said.

Notably, he attributes the high growth to a combination of “innovation strength, successful interception of market trends and sustained ability to take share and outperform the market, along with a thriving industry environment, gives us tremendous confidence in both the near and longer term outlook for our business.”

Share repurchase

Further, Ciena upped their share repurchasing campaign with a total of 4.3 million shares taken off the market. This translates to $111.0 million in total purchases where Ciena purchased each share at $25.86. Mainly, the share repurchase plan targets the common stock. Further, the Board of Directors authorized an additional share repurchase plan that amounts to $500 million. However, as much as the share repurchase program will be at the firm’s discretion, it will strictly follow market conditions.

Furthermore, the firm is making all the right headlines in the market. In the latest developments, Gigaclear Networks will work with Ciena as it improves its service delivery to countryside customers. Particularly, Ciena will facilitate a network update which will enable customers in the rural areas access high-speed internet.

Healthy balance sheet

Concerning balance sheet, Ciena has a debt level of 36% of equity. This is after the debt shrunk from close to $1 billion to $693 million in the last 12 months. As such, the firm has enough free cash on hand that can comfortably take of short-term needs. This is in addition to the operating revenue of $229 million over the last 52 weeks.

As such, Ciena is in the right position regarding the debt level and the income generated. This means that the firm is operating at an efficient level. In essence, Ciena’s share price should pick up above the current price level. Further, investors should expect the support for both the 200-day and the 50-day moving averages to go up.

The coming year will be quite challenging regarding making estimates. There is the current threat of an escalation in global trade doldrums as global conflicts escalate. However, investors should peg their hopes on the strong strategy of Ciena which promises greater performance.

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