Why Ciena Stock Slumped 8.8% on Wednesday

By Rich Smith Markets Fool.com

What happened

Continue Reading Below

Shares of communications equipment supplier Ciena Corporation (NYSE: CIEN) slumped more than 10% in early-morning trading on Wednesday before climbing back to "only" an 8.8% loss as of 3:15 p.m. EST.

So what

Ciena reported disappointing earnings for its first fiscal quarter 2017 earlier in the day. Earnings per share came in at $0.03, well below analyst estimates of $0.29 per share. The analysts may have been projecting "pro forma" earnings, of course, but even by that measure, Ciena says its "adjusted" earnings for the quarter were only $0.26 -- still a miss.

Revenues likewise fell short of Wall Street's targets, with Ciena reporting Q1 sales of $621.5 million, short of the $632.6 million that analysts had forecasted.

Q1 disappointed, but can Ciena connect in Q2? Image source: Getty Images.

Continue Reading Below

Now what

The question is: Can Ciena bounce back?

Although it missed estimates, Ciena has already demonstrated some respectable momentum, with sales growing 8.4% year over year in the first quarter, and the company's $0.03 GAAP profit comparing well to the $0.08 per share that Ciena lost in the year-ago quarter.

What's more, Ciena's guidance for the current fiscal second quarter suggests that the growth streak will continue. Management is calling for revenues to range between $680 million and $710 million in Q2. At the midpoint, that would work out to another 8.4% growth rate compared to last year's fiscal Q2. Not for nothing, but it would also be nearly 10% more revenue than analysts are expecting Ciena to make.

The same investors who are selling Ciena today could soon have a reason to buy.

10 stocks we like better than Ciena
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Ciena wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.