This is what Barrons wrote on CIEN downgrade:

 

Ciena Stock Drops After Analyst Warns of More Trouble Ahead  By Alistair Bates Dec. 6, 2019 4:27 pm ET

UBS urged shareholders to sell their shares in Ciena, causing the stock to drop 3.5% Friday.

In a report released Friday, UBS analyst Tejas Venkatesh justified his pessimistic outlook by citing what he believes are signs of a fast-approaching downturn, something that could come as a surprise to investors after two years of consistent outperformance.

Ciena (ticker: CIEN) stock has gained 66% since the end of 2017, while the NASDAQ Composite has risen 25% and the S&P 500 has advanced 18%.

Although the telecommunications-equipment company has seen significant growth in revenue, this upward trajectory has been driven in large part by Facebook’s (FB) heavy spending, Venkatesh wrote. The social media service made up 13% of Ciena’s revenue last quarter. However, Venkatesh warns investors should expect this level of spending to decelerate and, with it, their shares to lose value.

“We are especially worried that decelerating networking spending at Facebook, which we believe was witnessed in Arista and Corning’s results, could also impact Ciena,” Venkatesh wrote in the note.

Arista Networks (ANET) stock plummeted in early November after the company released low fourth-quarter guidance. Having posted revenue of $654.4 million in the previous quarter, the company predicted that sales could fall to $540 million to $560 million in the fourth quarter. This was credited in a statement by CEO Jayshree Ullal to a sudden and substantial decrease in orders from a “specific cloud titan customer,” which is believed to be Facebook.

Venkatesh is apprehensive about spending cuts at U.S. telco titan AT&T (T), as well as at Indian companies Jio and Airtel, both of which have significantly reduced their capital expenditures. Such a cut in customer spending would stilt revenue growth and cause Ciena’s valuation to dive, Venkatesh argues.

The analyst maintains that Ciena will fail to meet revenue guidance for the January quarter and land below the Street consensus of $828 million at $810 million.

Ciena stock dropped 3.5% to $35.02 Friday, as the S&P 500 and Nasdaq Composite have gained about 1%.

Email: Alistair Bates at alistair.bates@barrons.com