Ciena Corporation (NYSE:CIEN) — This telecommunications equipment manufacturer provides equipment, software and services used to increase the capacity of fiber optic networks.
Near the end of last year, S&P Capital IQ reiterated its “buy” rating on CIEN stock even though its analysts reduced their fiscal 2015 earnings estimate to $1.05 per share from $1.17. For 2016, they forecast revenue growth of 6% and wider profit margins will lead to a 40%-plus jump in earnings to $1.50 per share. Capital IQ has a 12-month price target of $25 on CIEN stock.
On Feb. 13, JPMorgan Chase & Co. (NYSE:JPM) analyst Rod Hall said Ciena was his No. 2 rated pick out of 22 tech companies. He called CIEN stock “materially undervalued at current levels” with an “overweight” rating on shares. Hall said he expects news about optical long haul and metro build plans at the upcoming Mobile World Congress in Barcelona early next month.
Following a 12-month decline that began in October 2013 at just below $28, CIEN stock bottomed under $15 a year later and then began a series of short-term advances to its current resistance line at $20.
The chart contains several very favorable characteristics: a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), at $18; a MACD buy signal on Friday; a golden cross (50-day moving average crosses up through 200-day moving average) on Thursday; and a high-momentum attack on the resistance line at $20 from a bullish “W” pattern.
Since December, CIEN stock has been under high accumulation. A break above the resistance line at $20 provides a trading target of $25, which would provide nearly 25% returns from current levels.