Jim Cramer Might Come Back To This AI Stock Later

Ciena Corporation (NYSE:CIEN) experienced a remarkable 150% increase in share price over the past year, attributed largely to the growth of the AI industry. During a September 3rd broadcast, Jim Cramer expressed surprise at the negative sentiment surrounding optical networking products, stating that he believes these companies, including Ciena, Corning, Lumentum, and Coherent, represent the future.

Ciena's third-quarter earnings, reported on September 3rd, saw its shares decline by 10%, despite growth in several metrics. The company's guidance, however, was disappointing. Revenue for the quarter was expected to be $1.75 billion, which was in line with expectations. Interestingly, cloud providers account for 53% of Ciena's revenue, while two customers contributed to 41.75% of the firm's earnings.

This high dependence on a few customers and industries leaves Ciena vulnerable to market shifts. Management also noted that orders are growing faster than revenue, potentially leading to supply constraints and customer dissatisfaction. Ciena's order backlog of $8.5 billion, a record, extends through 2029. Its forward P/E ratio of 40.82 is in line with Corning and slightly lower than Lumentum.

Hedge funds hold stakes in Ciena, though this is lower than for Corning and Lumentum, and the short interest is significant at 8% of float.