TLDR
- Bank of America upgraded Ciena from Neutral to Buy, raising its price target to $355 from $260, citing strong cloud spending and data center buildout
- Rosenblatt raised its price target to $350 from $305, maintaining a Buy rating, driven by Ciena’s data center interconnect (DCI) business and margin expansion
- Ciena reported Q1 revenue of $1.43 billion, with adjusted EPS of $1.35, beating consensus of $1.17
- Order growth hit approximately 141% in the quarter, with a $7 billion backlog and a book-to-bill ratio of 2.4x
- The stock fell roughly 13% on Thursday after earnings, with a further 1% dip in Friday premarket, despite the analyst upgrades
Ciena (CIEN) stock fell sharply on Thursday after releasing quarterly earnings, even as the results beat expectations. The stock dropped around 13% and was down another 1% in Friday premarket trading.
That sell-off caught the attention of at least two analyst firms, both of which responded by raising their price targets on the stock.
Bank of America upgraded Ciena from Neutral to Buy, lifting its price target to $355 from $260. The upgrade was based on a revised view of cloud spending. Analyst Tal Liani had previously flagged concerns about slowing spending growth in the networking sector. After a deeper look at data center buildout plans and updates from major cloud providers, he changed his stance.
Liani noted that hyperscalers, Tier-2 clouds, and neoclouds are all planning to add data center capacity over the next three years. The new price target is based on 44x CY27E earnings per share, up from 39x previously.
Rosenblatt Raises Target on DCI Strength
Rosenblatt also raised its price target on Ciena, moving it to $350 from $305 while keeping a Buy rating. The firm pointed to Ciena’s data center interconnect business, expanding margins, and strong supply chain management as the key reasons.
Rosenblatt also flagged that Ciena does face supply constraints for some telecom components. However, the firm noted those products come from different manufacturing facilities than datacenter transceivers, so the impact is limited. Ciena does not compete with Nvidia for components, the firm added.
The new $350 target is based on 45x Rosenblatt’s fiscal 2027 EPS estimate. The firm said more bullish scenarios of $12 to $14 EPS could be reached if revenue grows above 30% with operating margins in the low 20% range.
Strong Q1 Numbers
Ciena’s Q1 results were solid across the board. Revenue came in at $1.43 billion, with an adjusted gross margin of 44.7%. Adjusted EPS of $1.35 beat the consensus estimate of $1.17.
Order growth jumped around 141% in the quarter. The company finished the period with a $7 billion backlog and a book-to-bill ratio of 2.4x.
Multiple analysts responded by raising targets. Barclays moved to $372. Wolfe Research lifted its target to $375. Stifel raised to $320 while keeping a Buy rating. Morgan Stanley moved to $286, citing a 76% year-over-year rise in DCI demand.
Despite the strong numbers, the stock has pulled back around 14% over the past week. It currently trades near $299.
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