Ciena Benefits From Telecom And Cable Capex Trends, Says MKM Partners

Strong capex trends among U.S. service providers and strength in the Indian and Chinese telecom markets could drive Ciena Corporation CIEN sales in 2018, according to MKM Partners. 

The Analyst

Michael Genovese of MKM Partners reiterated a Buy rating and $28 price target on Ciena shares.

The Thesis

Combined capex in the U.S. telecommunications and cable sectors is expected to grow by 9 percent in 2018, led by Sprint Corp S, Centurylink Inc CTL and AT&T Inc. T. This growth is expected to drive orders of communications equipment, Genovese said in a Tuesday note. (See the analyst’s track record here.)

“We believe there is order strength in the business at Verizon Communications Inc. VZ, in the cable market, in the hyperscale DCI space and in parts of Asia, including India," the analyst said. 

Ciena is one of the more well-positioned companies that could capture some upside as the telecom and cable sectors increase capex spending, he said. 

“In this very strong capex environment, we prefer telecom systems names that are directly exposed to service provider spending.”

Price Action

Ciena Corp. shares were up 0.23 percent at $23.74 at the time of publication Tuesday afternoon. 

Related Links:

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

T Mobile's Layer3 TV Acquisition Is Scaring The Telecom Space