MKM Partners maintained a Buy rating on CIENA (NYSE: CIEN), and cut the price target to $26.00 (from $29.00), following the company's 4Q earnings report. Revenues came in at $692mn, $8mn better than expected. Cyan revenues were $84mn, $34mn higher than forecast, due to strong CAF-related spending at Windstream. This suggests organic revenues missed expectations by ~$25mn. MKM believes that the shortfall was driven by weaker sales at a single European customer and in the U.S. Government vertical. Cyan is now expected to be $30mn, versus our previous $40mn estimate. The implied organic sequential revenue change is -11%, and normal 1QFY seasonality is -9%. However, most analysts were modeling better-than-normal seasonality due to the 100G Metro ramp at Verizon.

Analyst Michael Genovese commented, "CIEN traded down 17% yesterday following decent 4QFY15 results and 1QFY16 and FY16 guidance that (when adjusted for a pull-forward in Cyan revenues) was slightly below expectations. We recommend buying on the pullback since demand trends are actually improving and all of the growth drivers (100G Metro, DCI, SDN software and ERIC distribution) are in place and tracking mainly according to plan. The margin and cash flow performance continues to be impressive, and the company raised its long term OMs target to 15% from 7%-10%. This new guidance implies that management believes it can lift GMs by 200bps-300bps from the already solid current 44%-45% level over the next few years."

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Shares of CIENA closed at $20.04 yesterday.