UPDATE: Nomura Reiterates Buy Rating, Raises PT on Ciena Corporation on Solid FQ1 Results

In a report published Friday, Nomura reiterated its Buy rating on Ciena Corporation

, and raised its price target from $17.50 to $20.00. Nomura noted, “After a few quarters in which gross margins disappointed, Ciena posted the second sequential jump in profitability to underline its future earnings power. Gross margins rose to 44.6% (from 40% in mid 2012), helped by a product mix that won't all be sustained through 2013, but reassures that management‟s long-term mid-40s gross margin target is realistic. Opex rose just 0.7% y/y, and while this was helped by project costs slipping into Q2, this growth rate does illustrate that underlying cost dynamics are under tight control. Despite recording strong order bookings, Ciena‟s revenues have disappointed in recent quarters. We still see upside potential to consensus estimates. We retain our Buy rating on Ciena to reflect the likelihood of positive earnings revisions in the quarters ahead. Valuation appears a little stretched when looking at through-cycle earnings power (13.6x CY2014E earnings), but given the strong momentum likely this year and next, we do not see this as a material limiting factor.” Ciena Corporation closed on Thursday at $17.53.