Ciena Corp (NYSE: CIEN) saw its stock rise by about 4% in premarket trading on September 23 after analysts at Citi double-upgraded the shares from Sell to Buy.
Citi also raised the price target significantly from $44 to $68, indicating a potential upside of approximately 30.48% from the current price levels.
The analysts at Citi believe that the prolonged issues of excess inventory and weak demand in the telecom and cable sectors are beginning to fade.
They anticipate that this shift will lead to a return to mid to high single-digit growth for Ciena in fiscal year 2025.
Bank of America downgrades Ciena stock
Not all analysts share this optimistic outlook.
Earlier this month, on September 5, Bank of America downgraded Ciena from Buy to Neutral while maintaining a price objective of $59.
Analyst Tal Liani expressed concerns about potential risks to the company’s earnings estimates.
Despite management’s positive commentary during the last earnings call, underlying numbers appeared soft.
For instance, third-quarter revenues, although beating Street estimates, declined by 12% year-over-year.
Additionally, the fourth-quarter revenue growth guidance of -2.6% missed expectations, which stood at -0.5%.
Ciena stock: recent developments
In corporate developments, Ciena announced on September 4 that its Senior Vice President and Chief Financial Officer, James E. Moylan, Jr., plans to retire effective August 28, 2025.
Moylan will continue to serve as CFO until a successor is appointed and will assist in the transition process.
The company has initiated a search to identify his replacement, aiming for a smooth handover of responsibilities.
Ciena has been showing signs of momentum in its core business operations.
The company is experiencing growing engagement with cloud service providers and a gradual recovery with traditional service providers.
According to President and CEO Gary Smith, Ciena’s focus on innovation aligns well with customers’ needs for building cloud and AI-capable infrastructures.
This strategic alignment positions the company to gain market share and deliver profitable growth in the coming years.
Ciena’s Q3 earnings
In its fiscal third quarter ending July 27, Ciena reported revenue of $942.3 million, surpassing analysts’ expectations by nearly $14 million but reflecting an 11.8% decrease compared to the same period last year.
Adjusted earnings per share came in at $0.35, down about 40.6% year-over-year but beating estimates by $0.09.
The company’s gross margin improved slightly to 43.7% from 42.7% in the previous year, indicating better cost control.
Revenue from the Americas was particularly strong, amounting to $718.6 million or 76.3% of total revenue.
The company also made strategic financial moves during the quarter. It repurchased approximately 0.6 million shares of common stock for an aggregate price of $29 million.
Ciena ended the quarter with cash and investments totaling $1.2 billion, providing a solid liquidity position.
Accounts receivable stood at $899.9 million, and inventories totaled $937.4 million, which includes raw materials, work in progress, and finished goods.
Two customers each accounted for more than 10% of the company’s revenue, representing a combined 26.6%.
Ciena stock: valuation
In terms of valuation, Ciena is currently trading at levels that some analysts find attractive, especially given its growth prospects in cloud and AI infrastructure.
Citi raised its fiscal year 2025 and 2026 earnings per share estimates by 5% and 10%, respectively, citing increased visibility and reduced risk to future estimates.
The company’s efforts to diversify its supply chain and establish direct sourcing relationships with major component suppliers are expected to enhance cost efficiency and revenue stability over time.
While the fundamental indicators point toward a potential rebound for Ciena, particularly with the increasing demand from cloud providers and the AI sector, the stock’s future performance will also depend on market sentiment and technical factors.
The mixed analyst ratings and upcoming changes in executive leadership add layers of complexity to the investment decision.
To gain a more comprehensive understanding of Ciena’s potential trajectory, it would be prudent to examine the technical charts and market trends that could influence the stock’s movement.
So, let’s explore the technical aspects to assess where Ciena’s stock might be headed shortly.
Ciena stock: short-term charts suggest bulls are in control
Having made its all-time high above $75 in late 2022, Ciena’s stock entered a prolonged downtrend.
However, that downtrend seems to be coming to an end this year.
Earlier this year in March, the stock made a 1-year high at $63.24 and although it fell to $44 levels soon after, it has rebounded and is back to trading above the $60 level.
Source: TradingView
This swift move has turned short-term technical indicators bullish.
Hence investors, who like analysts at Citi are bullish on the stock can initiate long positions at current levels closer to $60 with a stoploss below the recent swing low at $50.67.
If the short-term upward momentum leads to bullishness on the medium-term charts, we might soon see Ciena hitting Citi’s price objective of $68.
Traders who have a bearish outlook on the stock also have a low-risk entry on their hands right now, but considering the bullish momentum the trade might not work out.
Nonetheless, those who want to short the stock can initiate a small short position at current levels with a stop loss above the March high.
If the bullish momentum stalls it can cause the stock to fall to near $50 levels and if it fails to find support there it can slide further to near $44, where one can book profits.
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