Ciena Earnings: Some Of Wall Street's Brightest Are Watching This Before The Call

In a report published Monday, MKM Partners analyst Michael Genovese maintained a Buy rating on

, with a price target of $25. In the report, MKM Partners noted, "We are reiterating our Buy rating based on our expectation of solid 1QFY15 earnings and good 2QFY15 guidance demonstrating sharp (~500bps) GMs improvement from 4QFY14 through 2QFY15. Investors should react positively to the report, we think, on a strong sequential sales outlook for the April quarter and GMs trajectory that likely confirms the AT&T pricing concessions improved meaningfully starting January 2015." "Ciena also recently secured a contract to be AT&T's primary Optical supplier for Domain 2.0." Genovese wrote, while adding, "We think it is possible that Optical may account for a larger share of AT&T's capex budget in 2015 than in 2014 since AT&T is well behind Verizon in terms of 100G long-haul deployments. Verizon is set to ramp 100G Metro spend in 2015." The analyst said, "We believe Ciena's Verizon revenues can grow in FY15 even in a flat capex environment at the carrier. Verizon is likely to remain a major 100G customer in 2015, but with the focus shifting from long-haul to Metro. Ciena has largely completed its global 100G long-haul footprint build-out with Verizon, and Alcatel-Lucent is moving ahead with its secondary LH network, but there is still a large LH channel card revenue opportunity ahead. Additionally, Ciena will likely be named the primary 100G Metro vendor to the carrier in 1HCY15 according to our checks. The 100G Metro revenues opportunity at Verizon should be roughly 3x the size of the long-haul opportunity over time."