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Ciena (NYSE:CIEN) received a significant boost as Evercore ISI, the investment firm, upgraded its outlook on the stock. The firm stated that the last earnings report had “sufficiently reset” expectations and could potentially lead to exceeding expectations and subsequent raises throughout the remainder of the fiscal year.
Positive Outlook and Upgraded Price Target
“We think cloud and India revenue growth can offset any weakness with North American service providers, which could enable an upside path to 5% revenue growth in FY24 (vs guide of 1-4%),” analyst Amit Daryanani wrote in an investor note.
Daryanani upgraded Ciena to outperform from in line and raised his price target to $57 from $52.
Potential for Growth and Margin Expansion
Ciena also has the potential for roughly 200 basis points in gross margin expansion thanks to a better mix and lower supply chain costs. With better growth and margin expansion, earnings per share could hit $3.50 or more in fiscal 2024, well above the $2.90 per share consensus estimate.
“Currently trading at 16x consensus FY24 earnings and 13.5x our FY24 upside earnings, we don’t think the stock will move too much lower even if revenue growth comes in below our expectations,” Daryanani said.
Attractive Asset and Positive Market Movement
Ciena is a “very attractive asset” seen as the best-in-class optical vendor and the stock is likely to move higher thanks to a “series of beat and raises coupled with multiple expansion,” according to Daryanani.
As a result of the upgrade, Ciena shares rose 1.8% in premarket trading on Friday.
Analysts are largely bullish on Ciena (CIEN). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates CIEN a HOLD.
