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.
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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.