TLDR
- Bank of America upgraded Ciena’s rating from Neutral to Buy, increasing its price target from $260 to $355, citing strong cloud investment and data center expansion
- Rosenblatt boosted its price target for Ciena from $305 to $350 while maintaining a Buy rating, driven by the company’s data center interconnect (DCI) operations and margin growth
- Ciena posted Q1 revenue of $1.43 billion and adjusted EPS of $1.35, which beat the consensus estimate of $1.17
- Order growth reached approximately 141% in the quarter, with a $7 billion backlog and a book-to-bill ratio of 2.4x
- Despite analyst upgrades, the stock dropped roughly 13% on Thursday after earnings, with an additional 1% dip in Friday premarket trading
Ciena (CIEN) shares fell sharply on Thursday following the release of its quarterly earnings, even though the results exceeded expectations. The stock declined around 13% and slid another 1% in Friday’s premarket session.
This sell-off caught the attention of at least two analyst firms, both of which responded by raising their price targets for the stock.
Bank of America upgraded Ciena from Neutral to Buy, lifting its price target from $260 to $355. The upgrade was based on a revised outlook for cloud spending. Analyst Tal Liani had previously raised concerns about slowing spending growth in the networking sector. After a deeper analysis of data center buildout plans and updates from major cloud providers, he changed his stance.
Liani noted that hyperscalers, Tier-2 clouds, and neoclouds all plan to expand data center capacity over the next three years. The new price target is based on 44x CY27E earnings per share, up from the previous 39x.
Rosenblatt Raises Target on DCI Strength
Rosenblatt also increased its price target for Ciena 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 key reasons.
Rosenblatt also flagged that Ciena faces supply constraints for some telecom components. However, the firm noted these products are manufactured at different facilities than data center 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 achieved if revenue grows above 30% with operating margins in the low 20% range.
Strong Q1 Numbers
Ciena’s Q1 results were solid across all metrics. 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 ended the period with a $7 billion backlog and a book-to-bill ratio of 2.4x.
Multiple analysts responded by raising their targets. Barclays moved to $372. Wolfe Research lifted its target to $375. Stifel raised to $320 while maintaining a Buy rating. Morgan Stanley set its target at $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.
