BofA upgrades Ciena to ‘buy’ on stronger growth outlook

Investing.com -- Bank of America upgraded Ciena Corp (NYSE:CIEN) to "buy" from "neutral," lifting its price target to $95 from $70, on improving demand, stronger long-term growth prospects.

BofA pointed to steady demand from North American service providers and increased orders from companies building large-scale data centers, known as hyperscalers, which are driving the need for more advanced networking equipment.

BofA now expects Ciena’s revenue to grow by 9.5% in fiscal 2025, up from its earlier estimate of 8%.

Ciena is expected to benefit from its leading position in the optical networking market, holding a 60% share in key high-speed networking equipment. Hyperscalers are projected to account for over 30% of Ciena's revenue in 2025, with additional growth coming from services like underwater internet cables and managed fiber networks.

However, the company missed its profit and margin targets for the fourth quarter and expects only a slight revenue increase of 1% in the first quarter of 2025. Ciena’s profitability has been hit by shifts in product demand, but management anticipates improvements with higher sales and new product launches by 2027.

Even after the quarterly miss, BofA sees Ciena’s potential for long-term growth as a reason for the upgrade and higher price target.