Ciena's Selloff Overdone; MKM Sees AT&T As Headwind, But Verizon As Driver

Shares of Ciena Corporation (NYSE: CIEN) slipped Wednesday after the company reported Q1 FY2017 revenues and EPS short of expectations.

The selloff seems overdone, despite the decline in sales to AT&T Inc. (NYSE: T), especially with Verizon Communications Inc. (NYSE: VZ) expected to grow as a customer through FY2017, MKM Partners’ Michael Genovese said in a report.

Genovese reiterated a Buy rating on Ciena, with a price target of $30.

Ciena’s shares declined 9 percent after the company reported its revenues and EPS at $622 million and $0.26, short of consensus estimates of $632 million and $0.29, respectively.

Related Link: Ciena Sets Up Strong For 2017 With New Products Doing Well

AT&T Headwind

The company grew its revenues 8.4 percent year-over-year in the January quarter, despite a 19 percent year-over-year decline in AT&T sales to $102 million, Genovese noted. He added, “We expect AT&T to be down for Ciena in FY17 but for the declines to moderate through the year since Ciena is still the carrier's primary 100G vendor and is deeply involved in its NFV initiatives.”

Verizon As A Driver

Verizon became a +10 percent customer Ciena in Q1 FY2017 and is expected to grow sequentially through FY2017 driven by Metro, the analyst mentioned.