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Wednesday, UBS analysts revised their price target on CIENA (NYSE:CIEN) shares, lowering it to $73.00 from the previous $85.00, while maintaining a Neutral rating on the stock. The revision follows CIENA’s first-quarter revenue report, which exceeded expectations with $1.07 billion, surpassing both UBS’s estimate of $1.06 billion and consensus estimates. Earnings per share (EPS) for the quarter also outperformed projections, coming in at $0.64 compared to the anticipated $0.44. The stronger-than-expected gross margin (GM) of 44.7% was highlighted, significantly above the "low 40s" guidance. According to InvestingPro data, CIENA currently trades at a P/E ratio of 118, suggesting a premium valuation, though the company maintains strong liquidity with a current ratio of 3.54.
Despite the positive results, UBS noted that the GM boost was attributed to several non-recurring items, including a one-time software sale, which are not expected to repeat in the second quarter. Consequently, CIENA has guided the Q2 GM back to the low 40s, while maintaining its full-year GM guidance of 42%-44%, unchanged despite the robust first-quarter performance. InvestingPro analysis reveals multiple additional insights about CIENA’s financial health and valuation metrics, with 13 key ProTips available to subscribers.
The demand outlook for CIENA remains strong, according to UBS. The company’s first-quarter revenue beat and an improved second-quarter revenue guide of $1.09 billion at the midpoint—above UBS’s estimate of $1.01 billion and the consensus of $1.07 billion—suggest continued business momentum. This growth is driven by significant orders from Service Providers, marking the strongest consecutive order volume in over two years, and Cloud Providers, which contributed to half of the total orders.
Looking ahead, CIENA anticipates fiscal year 2025 growth at the high end of its 8%-11% range. In response to the company’s strong first-quarter results and guidance, UBS has adjusted its estimates upward. However, the firm still considers the stock to be fairly valued at 26 times its fiscal year 2025 earnings estimate, leading to the maintained Neutral rating despite the reduced price target.
In other recent news, CIENA’s first-quarter financial results have drawn significant attention from analysts, with several firms adjusting their ratings and price targets for the company. Stifel maintained a Buy rating with a $95 price target, citing CIENA’s revenue exceeding expectations and strong order momentum, particularly from cloud service providers. Northland upgraded CIENA from Market Perform to Outperform, setting a new price target of $75, driven by a 14% year-over-year increase in Service Provider revenues and robust first-quarter orders. Needham, while maintaining a Buy rating, reduced its price target to $90, acknowledging CIENA’s strong performance but expressing caution due to one-time gains in non-GAAP gross margin.
Morgan Stanley (NYSE:MS) also lowered its price target to $76 from $80, maintaining an Equalweight rating and highlighting potential gross margin volatility and tariff uncertainties. Similarly, Raymond (NSE:RYMD) James adjusted its price target to $79, maintaining an Outperform rating, while noting concerns about tariffs and one-time factors affecting gross margins. Despite these adjustments, CIENA’s performance in the first quarter has been generally positive, with analysts recognizing the company’s growth in the Service Provider segment and its strategic positioning in the optical networking space. CIENA’s guidance for fiscal year 2025 sales is at the higher end of the anticipated growth range, further underscoring the company’s strong market presence. However, the mixed reactions from analysts reflect a cautious optimism about CIENA’s future amid potential challenges.
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