Fiber optics providers
Ciena NYSE: CIEN and
Clearfield NASDAQ: CLFD are trading at multi-year highs as network upgrades spur revenue growth.
Although they operate in similar industries and are well established, these are quite different companies.
With a market capitalization of $11.49 billion, Ciena is on the lower end of the large-cap designation. The Maryland-based company makes networking hardware and software, and provides services in the areas of data transport, delivery, and management. It serves enterprise clients including cable operators, corporations, and government agencies. Its clients hail from all regions around the globe.
The stock gapped up more than 16% on December 9, following the company’s strong fourth-quarter report. Revenue was up 26%, to $1 billion. Earnings came in at $0.85 per share, a year-over-year gain of 42%.
MarketBeat earnings data show that Ciena beat revenue views in the quarter, while earnings were in line. It’s topped both top- and bottom-line expectations in the previous three quarters.
In the earnings conference call, CEO Gary Smith said, “Orders in the quarter were once again significantly higher than revenue. And with our third consecutive quarter of orders outpacing revenue, we have substantial momentum and increased confidence in the demand environment.”
He added that the company ended the year with its highest-ever backlog, totaling approximately $2.2 billion.
“We doubled our backlog of the year ago,” Smith added.
The stock was trading fractionally higher mid-session Tuesday, following the company’s announcement that it would repurchase $250 million in shares.
Ciena is currently far out of buy range, with shares trading 12% above their 10-day average. A pullback to even a short-term moving average could present a place to initiate a position.
Analysts have somewhat moderate earnings forecasts for the foreseeable future, pegging earnings growth at 7% this year and 19% in 2022. The network buildout trend and the company’s growing order backlog bode well for future revenue growth that could drive stock price appreciation.
Clearfield is a small-cap, with a market capitalization of just $890 million. The company designs and manufactures fiber optics delivery and management products for communications networks. The majority of its revenue comes from U.S. customers. Clearfield specializes in rural broadband connectivity.
The stock is up 6% since the company reported its fourth quarter on November 4. It rallied to a high of $72 on November 12 before pulling back and finding support well above its 50-day moving average.
On Tuesday, the stock was trading just above its 10-day moving average. Clearfield shares are up 38.68% in the past three months, 155.70% year-to-date, and 148.66% in the past 12 months.
Revenue in the most recent quarter came in at $45.2 million, up 66%. Revenue growth accelerated in the past four quarters. Earnings were $0.53 per share, a year-over-year increase of 141%. Earnings grew at triple-digit rates in six of the past seven quarters.
In the earnings release, CEO Cheri Beranek summed up the favorable conditions contributing to the company’s fast growth.
“Clearfield delivered record-setting financial performance in the fourth quarter and for the full fiscal year 2021 in a market that is changing dramatically,” she said. “We are in the middle of a historic investment cycle. Due to our consistent focus on customer service, quality product, and our ability to nimbly respond to customers’ changing needs, Clearfield has built an advantageous position in the broadband market and continues to benefit from the rising demand for fiber.”
As a small company, Clearfield doesn’t have as much analyst coverage as a larger stock. According to MarketBeat analyst data, based on three ratings, analysts have a “buy” rating on the stock with a price target of $49, representing a 24.58% downside.
With the support at the 10-day line, Clearfield is in buy range. The support above key moving averages appears to be holding, although a broad market pullback could still mean the stock moves into a deeper correction.
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