Recent Sell-Off In Ciena Creates Opportunity; Morgan Stanley Upgrades To Overweight

Morgan Stanley issued a company note on Ciena Corporation CIEN after a recent sell-off in shares has made the stock attractive based on valuation. Morgan Stanley upgraded Ciena from Equal-weight to Overweight and lowered its price target from $25 to $23.

Analysts Meta Marshall, James Faucette and Yuuji Anderson wrote, "Many 100G metro builds are set to kick-off in 2016, with major investment lasting into 2018. We would expect Ciena's revenue and EPS growth to accelerate as this upgrade gains strength...with the macro concerns that have sent the stock down an additional 10 percent since January 1st, we now think that the stock is attractive."

Morgan Stanley believes that Ciena looks undervalued compared to its peers, as Ciena has been a consistent leader in the optical industry, particularly with regards to top line performance and earnings growth over the past four years. Ciena is believed to have the opportunity to increase profitability by improving operational efficiency which could drive its share price higher in 2016.

Analysts note that Ciena's earnings could continue to be volatile in the future as the company has high customer concentration, which is subject to cyclical economic conditions. However, Ciena has made significant investments in its business operations that could position the company to deliver higher quality products and drive market share.

Shares of Ciena recently traded at $18.94, up 4.3 percent.