Market Overview

Analyst: Ciena Benefits From Carrier Capex Outlook, Improving Competitive Environment

Analyst: Ciena Benefits From Carrier Capex Outlook, Improving Competitive Environment

With Ciena Corporation (NYSE: CIEN) and other optical peers navigating a maturing optical market in 2017, the decks are now cleared for outperformance over the next year, according to Goldman Sachs. 

The Analyst

Goldman Sachs analyst Doug Clark upgraded Ciena from Neutral to Buy and increased the price target from $24 to $27.

The Thesis

Ciena is a key beneficiary of a more bullish outlook on U.S. carrier capex, improving competitive dynamics and muted expectations amid decelerating optical market growth, Clark said in a Monday note. (See the analyst's track record here.) 

Clark estimates U.S. carrier capex will increase by 3 percent year-over-year in 2018, or 5 percent with the $1-billion incremental investment from AT&T Inc. (NYSE: T) included. Ciena is a key beneficiary given its sizable exposure to AT&T and Verizon Communications Inc. (NYSE: VZ), the analyst said. 

CIena could see further upside from the U.S. tax cut, the potential removal of net neutrality and 5G investments, according to Goldman Sachs. The four-point gain Ciena experienced in the WDM optical market excluding China over the past three years is proof of its product and competitive differentiation in the market, Clark said. 

"We believe Ciena can continue to take market share given differentiated technology and favorable customer exposures, leading to accelerating growth and industry-leading margins." 

The Price Action

Ciena shares are down over 7 percent over the past year but were up 2.87 percent at $22.57 in Tuesday afternoon trading. 

Related Links:

Needham Calls Lumentum Its 'Single Best Idea' For 2018 In Optical, Networking

Altice, T-Mobile, AT&T Would Benefit From Tax Reform, HSBC Says

Photo courtesy of Ciena. 

Latest Ratings for CIEN

Jan 2021NeedhamMaintainsBuy
Dec 2020Morgan StanleyMaintainsEqual-Weight
Nov 2020RosenblattDowngradesBuyNeutral

View More Analyst Ratings for CIEN
View the Latest Analyst Ratings


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