Why Ciena Stock Tanked by Almost 9% on Tuesday
Key Points
He lowered his fair value assessment by $100 per share.
However, due to recent price weakness, among other factors, he maintained his buy recommendation.
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A significant price target reduction by an analyst was a headwind buffeting Ciena (NYSE: CIEN) on the second trading day of the week. The $100-per-share cut drained optimism for the tech stock, and its price fell by nearly 9% during the day's trading session.
Pre-earnings cut
That pundit, TD Cowen's Joshua Buchalter, now believes Ciena's equity is worth $575 per share, well down from his previous fair value assessment of $675. Despite the chop, the analyst maintained his buy recommendation on the veteran tech stock.
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The adjustment was part of a broader take on semiconductor stocks, which included fresh evaluations of top sector names Nvidia and Broadcom. According to reports, Buchalter is generally bullish on the prospects for such companies, given the current capital spending on compute and networking equipment.
He feels that Ciena is striking a balance now between its still considerable long-term growth potential and the timing of that growth. That said, the stock's recent weakness creates a lower base for it to rise post-earnings; the company is slated to publish its fiscal third quarter results before market open on Thursday, Sept. 3.
An up-and-down year
Investor interest in stocks linked to the monster build-out of artificial intelligence (AI) has been wobbly at times this year, as concerns about them being over-bought rise nearly every time there's a rally.
To me, the important factor when evaluating them as an investment is their long-term potential as suppliers; on that basis, I'd rate the dependable Ciena highly. With that, I think the current weakness in the stock makes it rather attractive as a buy candidate.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom, Ciena, and Nvidia. The Motley Fool has a disclosure policy.
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