We recently published a list of 10 Worst 5G Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Ciena Corporation (NYSE:CIEN) stands against other worst 5G stocks to buy according to short sellers.
As we move a quarter of the way into the 21st century, the world is paving the way for new technologies to make human lives easier and more advanced. Out of those, 5G and artificial intelligence (AI) are two of the century’s most important innovations.
We discussed the correlation between the two of them in our article about the best 5g stocks to buy according to short sellers. Here is an excerpt from the article:
“In a CNBC interview at the Mobile World Congress Shanghai on June 26, director-general of the GSM Association, Mats Granryd highlighted the deep connection between 5G and AI and suggested that their mutual rise is not accidental. He said that “AI feeds off 5G and 5G feeds off AI.” This is especially evident in China, where the development of standalone 5G networks is well advanced and discussions are already shifting toward 5G Advanced (5.5G). While some countries lag, like the Philippines, Mats pointed out that this dynamic between 5G and AI is most prominent in regions with widespread 5G coverage…
…Mats believes that 5G will follow a similar path to become a common platform worldwide, which will also extend to AI. While some regions may advance faster than others initially, he showed confidence in the fact that everyone will eventually catch up and benefit from the integration of AI with 5G.”
The Outlook For 5G Industry
We also previously discussed the Market Research Future report which expects the 5G market to reach $229.41 billion by 2032, growing at a compound annual growth rate (CAGR) of 40.60% between 2024 and 2032.
According to a 5G Americas report, the wireless telecommunications sector continued to expand in the first quarter of 2024, driven by the widespread growth of 5G technology. Global 5G connections reached nearly two billion. North America’s leading adoption accounted for 32% of all 5G connections and added 22 million new connections, totaling 220 million. Latin America also experienced growth, with 8 million new LTE connections and 9 million 5G connections.
For the future, the 5G Americas forecast suggests that global 5G connections will reach 7.7 billion by 2028, with North America projected to have 700 million. The Internet of Things (IoT) is expected to further drive 5G adoption, with global IoT subscriptions expected to grow from 3.3 billion to 5 billion by 2028.
The Evolution of Mobile Networks with 5G Advanced and 6G
According to a March report by CNBC, telecom executives discussed plans for 5.5G or 5G Advanced at the Mobile World Congress in Barcelona, even as 5G is still being rolled out. The new stage of mobile technology is expected to enable advanced applications like mixed reality headsets, autonomous vehicles, and smart factories, which were initially promised with 5G.
The 5.5G technology will improve network capabilities by increasing data speeds and enhancing connectivity. It will also use AI to optimize networks and reduce power consumption. Huawei expects that 5.5G will begin commercial deployments by 2024, with the potential for much faster download speeds. The focus now is on improving 5G’s commercial relevance and paving the way for 6G in the future.
Moreover, a team of scientists, led by Professor Withawat Withayachumnankul from the University of Adelaide, has created a new polarisation multiplexer that could greatly improve 6G communications. The device works at terahertz frequencies, which are much faster than current wireless systems. It can send multiple data streams at the same time over the same frequency, effectively doubling the data capacity.
The multiplexer is built on a silicon base and has been successfully tested and reduces data loss compared to existing technology. The innovation could lead to faster, more reliable wireless networks and would benefit areas like telecommunications, video streaming, and future 6G mobile networks. The team expects it to drive more research and become available in commercial products within the next decade.
Our Methodology
To select the 10 worst 5G stocks according to short sellers, we used ETFs and screeners to identify over 40 stocks that have significant involvement in the 5G industry. Next, we narrowed our list to 10 stocks with the highest short interest. Finally, these stocks were ranked in ascending order of their short interest.
We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of telecom engineers discussing a communication infrastructure diagram.
Ciena Corporation (NYSE:CIEN)
Short Interest as % of Shares Outstanding: 3.34%
Number of Hedge Fund Holders: 38
Ciena Corporation (NYSE:CIEN) is a leading player in the global networking systems and software industry. The company is mainly known for its expertise in optical connectivity and is often recognized as a major force in this sector. Its portfolio includes a wide range of products and services designed to enhance telecommunications networks, such as optical network switches and routing platforms, as well as undersea cable technology.
Ciena’s (NYSE:CIEN) known clients include AT&T, Deutsche Telekom, and Verizon Communications. The company also offers software solutions through its Blue Planet platform, which uses machine learning to optimize network operations and prevent disruptions.
The company plays a significant role in the 5G transition. It offers advanced solutions for upgrading wireline networks and using automation to streamline operations. Its technology includes Network Functions Virtualization and Software-Defined Networking, which help modernize network systems.
The company’s products, such as versatile switching and routing tools, are built to handle the needs of 5G, which make service delivery and network management more efficient. It also provides expert services to assist operators in managing the shift from 4G to 5G.
While Ciena (NYSE:CIEN) is a noteworthy player in the 5G industry and many analysts view it in a positive light, some analysts remain pessimistic about the company for the short term. On September 10, TipRanks reported that Citi analyst, Atif Malik maintained a Sell rating on the company stock with a $44.00 price target. The analyst’s negative outlook stems from concerns that, despite a strong performance in the July quarter due to increased demand from cloud providers, order volumes are expected to decline in the next quarter.
He also noted that the recovery for telecommunications service providers, which make up more than half of the company’s sales, is anticipated to be slow with no major improvement in profit margins. Malik believes the company’s stock is currently overvalued, as the company is unlikely to gain significantly from early AI deployments.
In Q2, 38 hedge funds held positions worth $643.671 million in Ciena (NYSE:CIEN). Atreides Management is the company’s most prominent shareholder with nearly 3.6 million shares worth $173.078 million, as of June 30.
Diamond Hill Capital stated the following regarding Ciena Corporation (NYSE:CIEN) in its fourth quarter 2023 investor letter:
“Other bottom contributors in Q4 included Coterra Energy, VF Corporation andCiena Corporation (NYSE:CIEN). Networking systems company Ciena’s customers are working through their inventories, creating some uncertainty around near-term demand. However, the company’s cloud customers have helped offset some of this uncertainty and, longer term, we believe Ciena has a meaningful opportunity to take share in the switching and routing and optical markets.”
Overall, CIEN ranks 9th on our list of 10 worst 5G stocks to buy according to short sellers. While we acknowledge the potential of CIEN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CIEN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
