Ciena's Stock Poised For Double-Digit Growth As Demand Outweighs Supply Constraints, Says Analyst

Needham analyst Alex Henderson reiterated a Buy rating on the shares of Ciena Corporation CIEN, lowering the price target to $60 from $70. The company recently registered Street-beating performance in the second-quarter FY23.

The analyst noted delivery push-outs as Ciena reported other vendors also shipping more to customers, resulting in customers seeing more products come in than they could handle.

However, supply is increasingly not the constraint to shipments, the analyst adds. Instead, customers' ability to receive and deploy the product is increasingly the constraint.

Overall, the analyst sees the current pushbacks as temporary. Henderson notes that the pushbacks reflect operators' inability to handle the significant improvement in supply rather than any changes in underlying demand.

Strong demand and an improving supply chain have set Ciena up for double-digit growth, GM expansion, and significant Operating leverage. 

The analyst also expects Ciena to execute large buybacks, providing additional support for its stock and adding to EPS growth.

Price Action: CIEN shares are trading higher by 3% to $43.66 on the last check Wednesday.