Rosenblatt Downgrades CIENA (CIEN) to Neutral

Rosenblatt analyst Mike Genovese downgraded CIENA (NYSE: CIEN) from Buy to Neutral with a price target of $52.50 (from $65.00).

The analyst comments "We are downgrading CIEN to Neutral from Buy, and reducing the price target to $52.50 from $65. We are slightly lowering our FY25 EPS forecast to $3 (from $3.24) and employing a 17.5x PE multiple versus 20x previously. There are three reasons for the downgrade. First, while the Telecom market should somewhat normalize against easy comps, Optical spending by large Telcos may continue to be restrained in 2025. Second, Ciena is up against tough comps in the Webscale Cloud market, and is holding market share but not gaining. Related to this point, we are finally starting to see the ZR pluggables market take off, and this transition carries the risk of lower price ZR revenues cannibalizing higher price embedded DCI sales where Ciena is the strong market leader. Finally, Ciena does not have a great AI story for FY24 and FY25. The company may start to see some inside the Data Center revenues in 2H25 for its coherent modems (or transceivers) in ~20km cluster-to-cluster applications. However, in our view, Infinera (INFN, Buy) has a more compelling 2025 AI solution in the form of 1.6Tbps indium phosphide laser chips it plans to sell to Datacom transceiver makers and Web Scale Cloud providers. We think INFN has a better 2025 story versus Ciena since it is a share gainer in DCI and Metro. Infinera is winning share from others, not Ciena, but Ciena looks more like the overall market that continues to have demand issues, especially on the Telecom side."

For an analyst ratings summary and ratings history on CIENA click here. For more ratings news on CIENA click here.

Shares of CIENA closed at $49.34 yesterday.

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