2H21 likely in line. Ciena is scheduled to report 3QFY21 on Thursday, September 2 before the open. We think revenues could come in slightly above estimates, perhaps flat y/y at $977mn, which would be $5mn higher than consensus. We believe 3QFY21 orders were good, with B-B likely slightly above 1.0, but were down sequentially from the exceptionally strong orders in 2QFY21. 4QFY21 guidance should be in line, which we think is positive. Estimates call for 4QFY21 revenues to increase 26% y/y and 7% q/q to $1.045bn. For FY22, we expect Ciena will come in at the upper end of its 0-3% revenue growth guidance.

Not worried about miss but don't expect upside. In our opinion, Ciena is navigating supply chain challenges better than most. The company began increasing inventories last year in anticipation of strong orders and supply constraints. Inventory turns dropped from 5.9x at the end of 3QFY20 to 4.3x exiting 4QFY21. We believe the company is well positioned to achieve the high 20s percentages half-over-half revenue growth that is modeled for 2HFY21. We also think it is impressive Ciena is likely to deliver GMs above 46% in 2HFY21 even with the significant mix shift to new network footprint (vs. capacity adds) that is underway at large Telcos in North America and EMEA.

FY22 should be strong. We think Ciena is unlikely to give an FY22 outlook on next week's call. However, we believe the company could reinstate its 6%-8% multi-year revenue growth outlook when it reports 4QFY21. Additionally, it seems probable Ciena may exceed this target range in FY22 driven by the strong recovery in orders from large Telcos, Cable MSO and Webscale ICPs, and fairly easy comps, as long as there are no further significant supply shocks.

CIEN

Ciena Corporation

Technology

With Conservative 4Q Guide, It's a Great Entry Point Before FY22 Acceleration

We Expect In Line 2HFY21 Leading To Strong FY22

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