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Ciena (New York Stock Exchange: HUNDRED) shares fell approximately 3% premarket Thursday after Rosenblatt downgraded the stock to Neutral from Buy, citing restricted optical spending by large telecom companies and the lack of an ai story for FY24 and FY25, among other things.
The firm also lowered the price. target $52.50 from $65 on shares of Ciena, which provides networking systems, services and software.
Analysts cited three reasons for the downgrade. They noted that while the telecoms market should normalize to some extent against easy comparisons, optical spending by large telcos may still be constrained in 2025.
Second, analysts believe that Ciena faces tough comparisons in the Webscale Cloud market and maintains its market share but does not gain it. Relatedly, analysts are starting to see the ZR pluggable market take off, and this transition carries the risk that lower-priced ZR revenues will eat into integrated data center interconnect, or DCI, sales. higher prices, where Ciena is the strong market leader.
Finally, Ciena does not have a great ai story for FY24 and FY25. According to analysts, the company could start to see some revenue within the data center in the second half of 2025 from its coherent modems (or transceivers) in the approximately 20 km of cluster-to-cluster applications.
However, according to Rosenblatt, Infinera (INFN), which has a Buy rating on the company, has a more attractive 2025 ai solution in the form of 1.6 Tbps indium phosphide laser chips that it plans to sell to consumers. data communication transceiver manufacturers and Web Scale Cloud providers. .
Analysts believe Infinera has a better 2025 story than Ciena as it gains shares in DCI and the Metro network space.
Infinera is gaining share from others, not Ciena; However, Ciena is more like the general market that continues to have demand problems, especially on the telecom side, according to analysts.
Ciena (CIEN) has a Hold rating in Looking Alpha's Quant Rating system, which consistently outperforms the market. Meanwhile, the average rating of Seeking Alpha authors (total 1 author here) is more positive at a Buy and so is the average rating of Wall Street analysts, Buy.
