New Trade for September 3rd, 2020

5G networks will connect to fiber-optic networks for “long haul” purposes.  That will provide reliability for emerging automotive, robotics and medical applications.  Ciena  (CIEN) controls close to a quarter of the optical hardware networking market worldwide (excluding China).

The optical network transport market that was worth just over $23.6 billion in 2019 is expected to hit $56 billion in revenue by 2025, according to Mordor Intelligence.  That translates into a compound annual growth rate of 15.4%, indicating that Ciena could ramp up its current modest pace of revenue growth. 

In the last fiscal quarter the company reported a revenue increase of 3.4% year over year. Considering that only 8% of global telecom networks are expected to be covered by 5G this year.  According to GSMA Intelligence the coverage could go up to 34% by 2025.  So don’t be surprised to see Ciena climb in the forthcoming quarters since we are still in the early stages of 5G deployment.  

CIEN stock is currently trading at a relatively attractive valuation with a trailing price-to-earnings ratio of 29, which is much lower than the 5-year average multiple of 55.