Ciena's Stock Surges on AI-Driven Growth Prospects and Analyst Upgrades

Morgan Stanley, Jefferies hike Ciena price targets on AI opportunity By Investing.com

Jefferies analysts raised their price target on the stock to $80 from $65, citing the company's structural advantage in the optical space and new growth opportunities related to AI. The new target is based on 22.7x their calendar year 2025 earnings per share (EPS) estimate, up from 15.4x, reflecting the potential for higher upside in Ciena's business model and reduced risks from customer inventory and pluggables. Analysts were particularly impressed by Ciena's vision for traffic growth driven by cloud and AI, which could exceed the historical average of 25-30%. They noted that while AI traffic growth is currently concentrated within data centers, the physical limitations of GPUs will likely necessitate broader optical network connections in the future. "While most of today's AI traffic growth is contained inside the Data Center, power, space, and cooling constraints associated with GPUs make it clear that clusters will eventually have to be spread out - connected by Optical networks," Jefferies analysts wrote. Separately, Morgan Stanley also voiced confidence in Ciena's growth prospects, particularly in its intra-data center and long-haul direct current interconnect (DCI) positioning. The firm increased its price target on Ciena shares from $60 to $63. Morgan Stanley analysts believe that coherent technology in data centers could be an additional upside driver for Ciena's growth targets, contributing to the company's performance beyond the traditional 6-8% growth range. Moreover, Coherent's foray into data centers, which is likely a 2026 theme, would be "an incremental market opportunity," analysts noted. "While timing of seeing upside to medium term targets from AI still uncertain, in combination with service provider recovery, pluggables, routing, MOFN, we feel like there are opportunities for upside in FY25 that leave us Overweight, with some of the AI drivers likely coming after that," they added. Ciena shares rose around 0.8% following the market open on Wednesday.

Stifel maintains Buy rating on CIENA shares By Investing.com

Stifel has maintained a positive outlook on CIENA (NYSE: CIEN), increasing its price target for the company's shares to $75 from the previous $68, while keeping a Buy rating. The firm's optimism is based on CIENA's potential for growth in the AI and Data Center markets, which was discussed during a recent webcast and a follow-up Q&A session with the company's management on Tuesday. The communication technology company, known for its network hardware, software, and services, has been identified by Stifel as well-positioned to benefit from a rebound in telecom service provider markets. Additionally, CIENA is seen as a likely long-term beneficiary from the growth of Data Center Interconnect (DCI) and internal data center interconnections, as AI-driven bandwidth demand is expected to increase. Stifel's raised price target reflects a heightened confidence in CIENA's ability to tap into these new growth areas. The firm's analysis and insights from the webcast and subsequent discussions underline the potential for CIENA's expanded role in the evolving market for AI and data center connectivity solutions. In other recent news, CIENA Corporation has been the subject of several analyst actions and has announced significant company developments. The company reported strong fiscal third-quarter performance, with revenues reaching $942 million and adjusted earnings per share at $0.35. Despite a year-over-year decline in revenue, the company's performance was bolstered by increased demand from cloud service providers. CIENA also announced a new share repurchase initiative authorizing the buyback of up to $1 billion of its common stock, set to commence in fiscal year 2025 and extend through the end of fiscal year 2027. This move reflects the company's confidence in its financial stability and future business prospects. In the realm of analysts' opinions, Jefferies raised its price target on CIENA shares to $80.00, maintaining a Buy rating on the stock. On the other hand, JPMorgan (NYSE:JPM) downgraded CIENA's stock from Overweight to Neutral, citing limited telecommunications spending and fewer options to improve gross margins. Meanwhile, Citi upgraded the company's stock from Neutral to Buy, highlighting easing inventory challenges and potential growth in fiscal year 2025. Lastly, the company announced the upcoming retirement of CFO Jim Moylan, with a search for his successor currently underway. CIENA's recent market performance aligns with Stifel's optimistic outlook. InvestingPro data shows that the company's stock has seen a strong return of 26.77% over the last month and an impressive 39.63% over the last three months. This upward trend is reflected in the stock trading at 97.71% of its 52-week high, supporting Stifel's bullish stance. Two key InvestingPro Tips shed light on CIENA's financial position. Firstly, the company operates with a moderate level of debt, which could provide flexibility as it pursues growth opportunities in AI and Data Center markets. Secondly, CIENA's liquid assets exceed short-term obligations, indicating a solid financial foundation to support its expansion plans. However, investors should note that CIENA is trading at a high P/E ratio of 69.06, suggesting the market has high expectations for future growth. This valuation aligns with Stifel's increased price target and the anticipated benefits from AI-driven bandwidth demand. For readers seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on CIENA, providing a deeper understanding of the company's financial health and market position.

Ciena Stock Powers the AI Cloud Boom -- Don't Miss Out - Ciena (NYSE:CIEN), Cisco Systems (NASDAQ:CSCO)

Ciena Co. CIEN can be considered a legacy company in the computer and technology sector when it comes to the Internet. It was one of the original manufacturers of optical fiber, which provided networking switches and connectivity solutions since 1992. The company has managed to stay relevant, unlike so many internet boom companies, and remains on the cutting edge of the artificial intelligence (AI) revolution. Ciena is essential to the AI boom as it provides one of the crucial elements required for AI deployment: high bandwidth and low latency connectivity. Ciena operates in the computer and technology sector, competing with networking companies like Cisco Systems Inc. CSCO, Juniper Networks Inc. JNPR, which was acquired by Hewlett Packard Enterprises Inc. HPE, and Infinera Co. INFN which is being acquired by Nokia Oyj NOK. How Ciena Is Essential to the AI Revolution Ciena is a leader in the optical networking segment, as its products enable long-distance, high-capacity data transmission solutions for the backbones of numerous networks. Data transmission volumes will only grow, driven by AI deployment and cloud computing. Its optical transceivers enable low-latency transmission, which is essential for AI applications to relay responsiveness and fast performance. Its Blue Planet AI-powered software-defined network (SDN) enables network operators to program, automate, and manage networks, orchestrate end-to-end services, and scale bandwidth on demand as needed. Cloud Providers Lead the Recovery Ciena is approaching positive normalization after many volatile years driven by the pandemic shortage and post-pandemic inventory glut. Cloud providers are leading the recovery, building out networks to support cloud and growing AI traffic. Data centers are a big chunk of Ciena's cloud provider clients. Three of the four major cloud providers are driving demand for Ciena's 400 ZR, a high-capacity datacenter interconnect (DCI) capable of transmitting 400 GB ethernet over DCI links, targeting a minimum of 80 kilometers. Ciena's other client group, service providers, is experiencing a gradual recovery as the inventory glut is digested. Ciena still expects the U.S. to recover fully in a few quarters, while Europe continues to lag due to geopolitical and macroeconomic headwinds. Gloomy Headline Numbers Underscore Improving Metrics Ciena's third-quarter of 2024 earnings report was a sign of relief as results underscore the recovery occurring, enabling a turnaround after many negative quarters. The company reported EPS of 35 cents, beating analyst expectations by 6 cents. GAAP net income was $14.2 million, down from $29.7 million last year. Adjusted net income was $50.8 million, which was also lower than the $89.1 million non-GAAP income in the year-ago period. Revenue fell 11.8% YoY to $942.3 million, which was better than expected compared to the consensus estimates of $928.31 million. Ciena reported a strong book-to-bill ratio above 1, indicating stronger demand that it can fulfill. Ciena Issues Flat Guidance Ciena expects revenues of $1.06 billion to $1.14 billion in the fourth quarter of 2024 versus $1.12 billion in consensus estimates. Adjusted gross margin is expected to be in the low 40% range, and adjusted operating expenses are expected to be around $350 million. Full-year 2024 revenues are estimated at around $4 billion, with a 4% to 8% CAGR long-term. CIEN stock tumbled 7% the following days. Ciena CEO Gary Smith commented, "We delivered strong results for the fiscal third quarter that reflect growing momentum with cloud providers and continued gradual recovery with service providers. With leading innovation that is well-aligned with our customers' focus on building cloud and AI-capable infrastructures, we are well-positioned to continue to gain share and deliver profitable growth." On Oct. 2, 2024, Ciena announced a $1 billion stock buyback program commencing in fiscal 2025 and ending in fiscal 2027. CIEN stock surged 7% on the announcement. CIEN Is Forming a Potential ABCD Reversal Pattern An ABCD pattern is a harmonic reversal pattern comprised of two higher peaks and one higher low. The pattern resembles a rising lightning bolt. A market structure high (MSL) sell trigger often triggers the reversal. CIEN stock initially sold off on its earnings report and guidance to a swing low of $50.83, forming the C-point. Shares rallied higher through the B-point pre-earnings peak at $59.42 to continue higher toward an imminent D-point, which could trigger a reversal. The daily anchored VWAP support is rising at $56.78. The daily relative strength index (RSI) is rising to the 75-band. Fibonacci (Fib) pullback support levels are at $62.91, $57.69, $53.76, and $50.83. Ciena's average consensus price target is $61.00, and its highest analyst price target is $68.00. Analysts have given it 10 Buy ratings and three Hold ratings. The article "Ciena Stock Powers the AI Cloud Boom -- Don't Miss Out" first appeared on MarketBeat. Market News and Data brought to you by Benzinga APIs