I See Upside Potential in CIEN, Despite Wall Street’s Hate

The market was up huge Tuesday, and everyone is wondering “how can I make money?” Well, look at this -- Ciena Corporation (NYSE:CIEN).

It’s a telecom survivor. It’s been around for a long time. It suffered. It came back -- and now it’s thriving, as demand for application performance and information security booms.

Now, the company software creates what management calls a “pay-as-you-earn” business model. A lot of industries are covered by this. You got wirelines, mobile networks, web scale, cable, media, finance, health care -- and it’s all really about their Converged Packet Optical. That’s the main part of the business.

Revenues in the last quarter were up almost 29%. Overall gross margins edged up to 44.4 from 43.1 year-over-year. But listen to this: research and development costs went up, other costs went up and nevertheless their operating margins leaped to 10.9% from 6.2%. For fiscal year ‘15 earnings -- right now the Street’s looking at a $1.22. About a month ago, they were looking at about a $1.11. For fiscal year ’16 -- $1.57 from $1.47.

Now there are some red flags. They got one customer who is 19% of the revenue and Wall Street hates the stock. 17, 18% of the stock -- the float is short. Nevertheless though, from here I see a move to $30. Longer term I think there could be a major breakout point. I think it’s got potential to $36. It is higher than average risk. It is volatile. I like it a lot, though.