By Philip van Doorn, MarketWatch
The stock plunged 24% on Sept. 3, after CEO Gary Smith warned during the company’s earnings call that a decline in customers’ spending brought about by the coronavirus crisis would hurt revenue for “the next few quarters,” and the price hasn’t recovered. But Smith added that demand for broadband access was increasing at an annual pace of 25% to 30%, meaning Ciena’s customers would eventually be forced to increase spending.
Cuellar said the shares are “pretty attractive” after the drop. He described Ciena’s service offerings as “pretty broad” and said the company’s technology was “dominant” in the quality of its engineering relative to its peers.
Inphi Corp. provides components for companies that make network equipment for telecommunications carriers and data center operators. Cuellar called it “a higher-growth name that has the best product cycle story in the space.”
Inphi has the highest forward price-to-earnings ratio on the list, but in this market, investors are clearly placing a premium on sales growth in the high double-digits. Cuellar said Inphi’s management expects 5G spending by its customers to “ramp hard” in 2022.
Lumentum Holdings Inc. /zigman2/quotes/204419752/composite LITE +2.58% sells optical and 3-D components globally, including laser sensors used in iPhones. Cuellar said the company is moving out of lower-margin businesses and makes “some really high value-added products with less competition.”
Here’s a summary of sell-side analysts’ ratings and price targets for the group:
|Company||Ticker||Share 'buy' ratings||Share neutral ratings||Closing price - Oct. 14||Consensus price target||Implied 12-month upside potential|
|Lumentum Holdings Inc.||LITE||88%||12%||$83.06||$102.50||23%|