Here's something you don't see every day: Network gear builder Ciena (Nasdaq: CIEN ) missed Wall Street's earnings targets in last night's first-quarter report, followed by a mediocre revenue outlook for the next quarter. That's usually a lethal combination, but the stock is soaring today.
Why is the air over Ciena's Maryland headquarters thick with champagne corks today? I want to point out three important details:
- A 6.6% overnight jump looks terrific in isolation, but Ciena's shares have actually lost nearly 9% of their value over the past five days. We're hardly looking at 52-week highs here.
- Ciena's friends and neighbors prepared Ciena's investors for a steel bath. The latest example was Finisar (Nasdaq: FNSR ) , which completely whiffed this week's third-quarter report in terms of meeting analyst expectations. Ciena plunged on Finisar's report and hardly even made up for the lost value today.
- But it's not all about lowered expectations. Ciena CEO Gary Smith made it clear that the longer-term market for networking equipment is as healthy as ever. "Our first quarter revenue does not reflect the underlying strength of the business and ongoing customer demand," he said. "We anticipate that our operating results for the second half of fiscal 2012 will be stronger than the first half."
Like Finisar and Infinera (Nasdaq: INFN ) before it, Ciena is basically calling a bottom to this negative cycle swing. It's no accident that all three stocks have crushed the market in 2012, and I'm sure the sector will navigate the next couple of quarters to another batch of impressive gains. Infinera in particular showed us how fundamentally strong the sector really is in spite of complaints from a few underperformers.
So Ciena and its networking peers are off to a surprisingly good start in 2012. But Foolish analysts have found an even more promising stock to stick in your portfolio this year. Learn all about The Motley Fool's Top Stock for 2012 in a special report -- free for a limited time.