Unlock: Ciena (CIEN) – Monster Winner for Clients

It pays to do fundamental research. This bullish view was presented to clients on October 12. Stock is ripping higher by +14% today to new 52-week high after strong earnings. To learn more about our approach and how you can become a successful trader, sign up for 2 week trial and test drive live chat room with some of the best traders: SUBSCRIBE

October 12, 2016

Ciena (CIEN) – With stock down 3.8% and down nearly 10% in past two days for no obvious reason, one bull is stepping here taking advantage of weakness and just bought 4,000 Jan’17 22/26 call spread for $0.91. Approx $364,000 bullish bet on 4x daily average call volume with implied volatility rising by +3.8%. Note this follows buyer of 6,000 November 23 calls last week for up to $0.51 offer that remains in open interest.

I presented this with a brief view two days ago about telecom / networking infrastructure stocks that are seeing unusual bullish call activity with Q3 earnings season starting and news flow improving for whole sector. On October 6, MKM Partners reiterated Buy rating after strong channel checks:

“Even though October, the most important month of the quarter and year, is still ahead, we are highly confident that 4QFY16 orders are strong. Expect the company to slightly exceed MKM/consensus estimates (with a B-B above 1.0) and guide 1QFY17 well driven by a positive inflection in North American Tier 1 Metro orders and strength in Subsea, Asia-Pacific including India, direct Web-scale orders in the U.S. and indirect Web-scale demand via wholesale carriers in Europe. In addition, GMs should not go below the 44.5+% level at any point, and the company should be well on its way to earning ~$2.00 per share in CY17.”

I highlighted in bold that comment about “web-scale orders” because it is significant part of total business and regarding this Jefferies had following to say on September 1. See snapshot below.