The stock market often feels like a gold rush, where everyone digs at the obvious spots marked “Nvidia” on the map.
But some treasures are buried deeper, under names that don’t yet shine in bold headlines.
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Ciena (CIEN)  provides networking solutions, which are critical to supporting the growing data and computing demands of cloud-based and AI-centric businesses.
Artificial-intelligence models require massive computing power and data movement among data centers. Ciena’s networking solutions help optimize these inter-data-center connections, enabling faster transfers of data.
“As AI traffic demand increase and do become more distributed, line systems that are reliable, maximize capacity on fiber and, most importantly, minimize power are critical to forward-looking network architectures,” Ciena Chief Executive Gary Smith said during the earnings call.
Ciena President and Chief Executive Gary Smith
Ciena/TheStreet
The company has been closely collaborating with cloud-services providers on a reconfigurable line system platform, or RLS.
“RLS is now being deployed by all of the major cloud providers as well as a growing number of service providers,” Smith said. “We expect orders and revenue for RLS to increase over the coming quarters, which lays further track quite literally for future business with capacity adds over time,” Smith said.
Ciena posted mixed Q4 earnings; the shares rose
On Dec. 12 Ciena reported mixed fiscal-fourth-quarter and full-year 2024 earnings. The stock surged 15% on the report and an additional 6% on Dec. 13.
Ciena posted adjusted earnings of 54 cents a share for the fourth quarter ended Nov. 2, short of Wall Street’s projection of 65 cents. Revenue came in at $1.12 billion, surpassing the consensus estimate of $1.1 billion.
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“As cloud and AI drive bandwidth demand across the network, we are positioned for accelerated revenue growth and market share expansion moving forward,” Smith added.
For the first quarter of fiscal 2025, Ciena forecasts revenue between $1.01 billion and $1.09 billion, according to its earnings presentation. Analysts’ expectations are at the lower end of the company’s revenue guidance range, at $1 billion.
Ciena forecasts average annual revenue growth of 8% to 11% from fiscal 2025 to 2027. The guidance is beyond many analysts’ expectations.
Still, some data show the growth of global data traffic slowing.
OpenVault’s recent data show that monthly average broadband data consumption in the third quarter rose by just 7.2% — the lowest growth rate since the company began tracking these trends in 2012, IEEE Communications Society reported.
Analysts set higher expectations on Ciena stock
Several analysts are gaining more confidence in Ciena after its guidance, raising their stock-price targets.
Bank of America upgraded Ciena to buy from neutral with a price target of $95, up from $70, citing improving demand from North American service providers and accelerated cloud and artificial-intelligence momentum, thefly.com reported.
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The analyst said Ciena’s three-year outlook of 8%-11% growth “seems brighter than we anticipated.”
Barclays raised the firm’s price target on Ciena to $97 from $67 and affirmed an overweight rating on the shares, also citing the company’s guidance.
Barclays analyst said the company’s guidance was above estimates, with long-term growth moved to the 8%-to-11% range from from 6% to 8%.
The firm also said that while margins are expected to narrow in the near term, Ciena is on track to ship a record number of line systems this year. This fiscal 2025 margin pressure is anticipated to turn into a tailwind in 2026 as line cards are integrated.
Evercore ISI analyst Amit Daryanani said Ciena could end up with an earnings-per-share run rate of $5-plus over the next three years in a bull-case scenario. That could place the stock-price upside past $100.
Evercore ISI raised its price target on Ciena to $85 from $65 and maintained an in-line (effectively neutral) rating.
Some analysts are cautious about the valuation.
Morgan Stanley raised Ciena’s price target to $80 from $63 and reiterated an equal weight (effectively neutral) rating.
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The firm warned that Ciena’s rosy revenue estimates do not add much follow-through to the company’s earnings per share. The investment firm said the valuation kept it on the sidelines regarding the stock.
Ciena’s forward price-to-earnings multiple is 33.11 as of Dec. 13. The stock closed at $89.72 on that date and has doubled in value this year.
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