2.7.2022 According to our research, a number of megatrends are driving our future. Within these overarching themes are companies that are capable of exploiting these changes in technology, consumer preferences, demographics, and environmental sustainability. These changes can lead to significant increases in their total markets, earnings trajectories and market capitalizations. We believe Ciena is one of these companies.
Ciena (CIEN) – Ciena is a leading global provider of optical networking equipment and other telecom infrastructure. The company has a broad portfolio of optical transport equipment and is increasingly diversifying into more data-centric portions of the market. Ciena's customer base now includes over 600 customers in 25 countries. They include service providers, enterprises, cable multiple system operators (MSOs), and government organizations. (CIEN is 1.98% FFND portfolio as of 2/4/2022.)
- Capital Expenditures for 2022 accelerating to over $250 Bln* – An all-time high driven by Internet Content Providers, Telecom Companies and Federal Stimulus.
- Secular growth outlook underpinned by numerous durable trends –
- Major optical upgrade cycle driven by continued use of significant amount of data
- 5G network buildout
- Data moving closer to the edge of the network, requiring higher infrastructure spending
- Leading products in the upgrade to 800 gigabit networks.
- Infrastructure Stimulus – The recently passed infrastructure plan should build out 5G networks nationally. We also believe some form of the Build Better Back legislation (BBB) will eventually become an incremental driver of electrification.
- Huawei, (the large Chinese telecom company) facing significant headwinds – Given potential security issues, the United States, Europe and India have stopped buying or are removing Huawei equipment creating a large opportunity for Ciena, which is now showing up in a record backlog. (Huawei is 0.00% FFND portfolio as of 2/4/2022.)
- Communications and 5G – CIEN identifies the rollout of 5G wireless networks in North America as needing ~$275B of infrastructure investment that the company is well positioned for, given its expertise in telecom infrastructure.
- We believe the market is underestimating Ciena’s earning power – With the company positioned as a leader in optical networks, a robust spending cycle and component cost anticipated to fall later in the year, Ciena’s margin should exceed expectations, leading to significant positive earnings increase.
*Source: Jefferies Research
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