|Alan Knuckman — our eyes and ears at the CBOE — says: “Well over 99% of all data traffic running between the continents of the world goes through fiber-optic cables on the bottom of the ocean like this…|
A deep-sea view of Sydney
And Alan says the 5G revolution won’t change that. “The problem is that the cables can only handle so much traffic,” he says. The 700,000 miles of submarine cables around the globe are simply inadequate.
“And all of the data will end up in data centers, facilities filled with electronic storage equipment.” Data storage ain’t cheap, requiring massive quantities of electricity to keep hardware at Goldilocks temperatures.
That’s why more companies are opting to build data centers in countries where electricity’s plentiful and cheap. “Google, Facebook and Amazon just announced that they're building out new data centers in Sweden, for instance.
“Of course, these data centers need to connect with the data centers here in the States,” says Alan. “And that's where submarine networks come in.
“According to TeleGeography,” he continues, “a leading authority on the international telecommunications market, the demand for submarine networks is going to compound at 40% annually.
“In other words, the 5G wave is going to double the demand for submarine networks about every year and a half.
“With the need for so many new connections,” Alan says, “it's an incredible opportunity for the company that leads the pack in building submarine cable networks.”
One such company is Ciena Corp. (CIEN) that “partners with 85% of the world's largest service providers for their fiber-optic and underwater internet network needs.” Big telecoms like AT&T, T-Mobile, Ericsson, Verizon… and many more.
Ciena doesn’t just lay cable on the ocean floor; the company’s a one-stop shop for telecoms: “It's the only vendor that addresses the systems, services, software and components… [for the] industry.”
And the 5G transition’s kicking Ciena’s profitability into high gear…
In 2016, before 5G, Ciena netted $125 millionIn 2017, when companies started shifting to next-generation wireless, Ciena made $1.6 billion.That’s a mind-blowing increase of 1,171% in just one year…
“That kind of earnings growth hasn't gone unnoticed,” says Alan, “In the last 21 months, Ciena's stock has climbed 112.09%.
“Remember, the demand for undersea cables alone is expected to increase by 40% a year for the foreseeable future. And Ciena's products can be found in 85% of the market.
“Based on Ciena's expected cash flow, my calculations put the shares at $66.65,” says Alan. This morning, shares are priced at $39.65, setting you up for a gain over 60%.
Alan’s take: “Buy Ciena before all the quick 5G gains get squeezed out.”