Ciena's Strong 2025 Outlook Wins Analyst Confidence: AI Bandwidth And Optical Market Expansion In Focus

Ciena Corp CIEN stock surged after BofA Securities upgraded it from Neutral to Buy and raised its price target from $70 to $95.

Needham analyst Ryan Koontz maintained Ciena with a Buy and raised the price target from $80 to $95.

Additionally, Northland Capital Markets, and Stifel raised their respective price targets on the stock.

On Thursday, Ciena reported a fiscal fourth-quarter 2024 revenue decline of 0.5% to $1.12 billion, beating the analyst estimate of $1.10 billion. The adjusted EPS of $0.54, missing the consensus estimate of $0.66.

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BofA Securities: Last quarter, Liani downgraded its rating to Neutral, noting that long-term growth opportunities were overshadowed by risks related to high implied second-half growth and valuation considerations.

However, trends are turning out better than expected, with stabilizing demand at North American Service Providers (SPs) and Hyperscalers’ AI bandwidth needs driving accelerated order momentum.

The 3-year outlook seems brighter than anticipated and modeled 9.5% fiscal 2025 revenue growth versus his prior 8% estimate.

SP inventory digestion is primarily complete, orders are improving, and B2B of North American SPs was higher than 1 in the fourth quarter.

With Cloud providers, AI deployments are driving demand for core networking applications, Data Center Interconnect (DCI) solutions, pluggable devices, and potential coherent optics penetration inside the data center by fiscal 2027.

Management expects Hyperscalers to account for more than 30% of fiscal 2025 revenues, with another 10%- 15% of indirect exposure through Managed Optical Fiber Network (MOFN) and submarine applications.

MOFN, currently 5% of revenue, is expected to grow significantly next year, driven by SPs building capacity to support Cloud providers.

Lastly, Ciena is also growing its share of the optical networking market outside China, up from 22% in 2022 to 27% and 28% in 2023 and the first half of 2024, respectively. The company holds roughly a 60% share of the 800G coherent optical equipment ports, a market that will likely grow materially.

Liani projected first-quarter revenue of $1.05 billion and EPS of $0.35.

Needham: Ciena reported mixed fourth-quarter results, with revenue +2% above consensus and EPS -$0.11 below, but strong fiscal 2025 and long-term revenue guidance (+8%-11%) was above consensus.

Fourth-quarter strength in Webscale benefited from share growth in 400ZR. However, a one-time E&O charge negatively impacted quarter margins, which Koontz found reasonable.

Strong fiscal 2025 guidance also benefited from improving demand from North American SP.

Strong execution paired with best-in-class technology and customer relationships should allow Ciena to continue to gain meaningful market share in its core TAM. However, Koontz needs to be bullish on its two new product segments.

Koontz projected first-quarter revenue of $1.05 billion and EPS of $0.39.

Price Action: CIEN stock is up 6.43% at $89.96 at the last check Friday.

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Image via Ciena.