Ciena Downgraded a Week Before Earnings, Stock Sinks

By Tomi KilgoreMarketsMarketWatch Pulse

Shares of Ciena Corp. sank 4.8% in active morning trade Wednesday, after Deutsche Bank downgraded the optical networking company a week before it's scheduled to report fiscal second-quarter results. Analyst Vijay Bhagavath cut his rating to hold from buy on concerns the stock will be range bound in the near term given expectations of that weak margin trends and sales in Europe and Latin America will be balanced with strong results from its cloud business. He cut his stock price target to $23 from $28. "Prudent to stay on the sidelines on this 'volatile' optical story," Bhagavath wrote in a note to clients. The stock has averaged a one-day post-earnings move of 13.2% over the past six quarters, including an average 12% gain on the three up days and an average 14.4% decline on the three down days. The downgrade makes Bhagavath only the fifth of the 25 analysts surveyed by FactSet to not have a bullish rating on Ciena. His price target is now tied for second lowest; the lowest is Drexel Hamilton's Greg Mesniaeff's $22 target, according to FactSet. Ciena's stock has lost 5.1% year to date, while the S&P 500 has gained 7.1%.

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