BofA-Merrill Lynch Upgrade Lifting Ciena Stock

Short-term options traders are call-skewed toward CIEN stock

Managing Editor
Nov 27, 2017 at 11:41 AM
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Ciena Corporation (NYSE:CIEN) received an analyst upgrade today, with BofA-Merrill Lynch raising its rating to "buy" from "neutral." The brokerage firm also reiterated its $28 price target -- representing expected upside of 31.6% to current trading levels -- and called CIEN stock "a clear share gainer" within the optical sector. Ahead of Ciena's Dec. 7 earnings report, the stock has been on the mend in the last two weeks. Below, we will check in with CIEN to see how the tech stock stock has been faring, and how sentiment is stacked up.

Ciena stock is currently up 1.6% to trade at $21.32, but has shed 13% year-to-date. Since falling to an annual low of $19.42 on Nov. 15, the equity has strung together back-to-back weekly wins, and the rally today has the shares on track to close north of their 50-day moving average for the first time since early August. 

Despite Ciena's longer-term technical troubles, analysts are mostly upbeat toward the stock. Of the 18 brokerages covering CIEN, 15 rated the shares a "buy" or "strong buy" at Friday's close, with not a single "sell" to be found. Furthermore, CIEN's average 12-month price-target of $28.79 represents a 35% increase from the stock's current perch.

Short sellers, on the other hand, have been ramping up their exposure. Short interest increased by 12.4% during the last two reporting periods to 21.16 million shares, which represents nearly 15% of CIEN's total available float. It would take more than seven days for the shorts to fully cover their positions, at the stock's average daily volume. 

In the options pits, short-term calls are more popular than puts, based on CIEN stock's Schaeffer's put/call open interest ratio (SOIR) of 0.51 -- though these results are skewed by heavy call accumulations in the January 2018 series. Nevertheless, the January 2018 24-strike call is home to peak open interest of 6,119 contracts, though it's not entirely clear if options traders bought or sold new positions here. 


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