CIEN - Embedded Expectations Analysis - 2019 08 09
Ciena Corporation (CIEN:USA) currently trades around historical averages relative to UAFRS-based (Uniform) Earnings with a 15.6x Uniform P/E, implying neutral expectations for the firm. However, management is concerned about guidance, tariffs, their global markets, and competition.Valens' qualitative analysis of the firm's Q2 2019 earnings call highlights that management may be concerned about their outlook. Management may be concerned about the company's stability in India, China, and Mexico, and may be overstating their confidence about EMEA and North American growth going forward. Additionally, management may be concerned about tariffs impacting the business, and may be overstating their confidence in their EPS, gross margin, and op-ex guidance overall.
Management also appear to be overstating their confidence about their competitive positioning, how customers are coming to them versus peers, and how strong and diversified their customer base and revenue growth is.
Ciena is a networking systems, services and software company, providing solutions that enable a range of network operators to deploy and manage networks that deliver services to businesses and consumers. The company provides hardware, software and services that support the transport, switching, aggregation, service delivery and management of video, data and voice traffic on communications networks. The company's solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education institutions and other network operators.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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