- Ciena Corp (NYSE:CIEN) reported a third-quarter FY22 revenue decline of 12.2% year-on-year to $868 million, missing the consensus.
- The non-GAAP EPS of $0.33 was in-line with the consensus.
- Needham analyst Alex Henderson reiterated a Buy and cut the price target from $88 to $70.
- The supply chain, not demand, hurt Ciena's print and Q4 guide.
- Ciena stated that a small set of low-priced ICs used in their high-margin transceivers had supply issues late in the quarter.
- Ciena's backlog increased to $4.4 billion, equal to 135% of his FY23 Product Sales forecast. Ciena expects to continue to build backlog in Q4. The impact of the inability to ship is pronounced.
- Ciena increased staffing by 11% resulting in a sharp contraction in near-term EPS.
- It's challenging to craft the shape and timing, but Ciena should see a strong rebound once the supply improves.
- Morgan Stanley analyst Meta Marshall reiterated an Overweight and price target of $60.
- Marshall highlights that while demand conditions remain robust and the backlog continues to grow, supply chain challenges continue to increase for CIEN, causing a significant shortfall to revenue expectations for the remainder of the year, just as others are starting to see the supply chain loosen.
- She notes that CIEN reported Q3 below her expectations.
- She adds that the primary constraints are around decommits of low-value ICs from a small number of suppliers.
- The analyst's immediate changes to estimates moving forward incorporate her view that the supply chain does not materially recover in Q4.
- She thinks the solid cloud and service provider capex through year-end set CIEN up well over the next couple of quarters, balanced by her expectations for the supply chain to limit upside in the near term.
- Rosenblatt analyst Mike Genovese reiterated a Buy and price target of $65.
- Ciena missed Q3 revenues and gross margins and guided Q4 significantly below expectations due to the shortage of a few critical low-cost analog semis stopping it from shipping finished goods.
- While the Q4 guide down on the supply chain was not unexpected, the magnitude was surprising.
- However, he sees this as the trough of known industry issues, not something new.
- FY23 should be a year of solid growth and margin expansion.
- Raymond James analyst Simon Leopold reiterated Outperform but cut his price target to $55 from $64 following Ciena's Q3 report.
- Shortages of a handful of crucial ICs, i.e., the golden screw, led to a sales miss and a much lower outlook.
- The results reflect poor execution in a difficult situation, but Ciena's robust portfolio, customer relationships, and ~$4.4 billion backlog encouraged him to look past the supply chain issues.
- The recovery will take time, but he sees Ciena as a share gainer with expanding margins.
- Price Action: CIEN shares traded lower by 1.72% at $44.70 on the last check Friday.
