Shares of Ciena Corp (NYSE:CIEN) rose in early trading Friday after the company reported strong fiscal third-quarter results, but analysts cut their price targets, citing valuation pressures and compressed sector multiples rather than a deterioration in Ciena’s growth outlook.
Here are some key takeaways:
- Needham analyst Ryan Koontz reiterated a Buy rating and reduced the price target from $600 to $520.
- Rosenblatt Securities analyst Mike Genovese reaffirmed a Buy rating, while slashing the price target from $720 to $525.
Check out other analyst stock ratings.
Needham: Ciena reported a strong quarter, with revenue growing 37% year-on-year to $1.671 billion. It beat consensus of $1.637 billion, Koontz said. The company’s non-GAAP earnings came in at $2.11 per share and non-GAAP gross margin at 46.4%, higher than consensus estimates of $1.73 per share and 44.9%, respectively, he added.
The analyst noted that fourth-quarter guidance was:
- Revenue of $1.70-$1.80 billion, ahead of consensus of $1.70 billion
- Non-GAAP gross margin of 44.5%-45.5%, above Street expectations of 44.8%.
- Non-GAAP operating margin of 19.5%-20.5%, versus consensus of 20.1%
“Mgt also expects backlog exiting FY26 to exceed $10B, implying a B2B of ~1.86 in 4QFY26, on strong order intake already seen in August,” he further wrote.
Like many of its AI-optical peers, Ciena’s stock declined 8% after the release, Koontz said.
Rosenblatt Securities: While Ciena’s revenue beat was marginal, its earnings “blew past” expectations, Genovese said. “The real story is backlog,” he added.
Backlog grew by $800 million from the previous quarter to $8.5 billion, compared with $600 million in sequential growth last quarter.
Management indicated that orders in the first month of the fourth quarter alone matched total orders through the third quarter, and called for the backlog to exceed $10 billion by year-end, the analyst stated.
“The market punished a margin guide we think is a floor, not a target, the same as we view the initial +30% revenue outlook,” he further wrote.
The price target has been slashed to reflect compressed sector multiples, Genovese said.
CIEN Price Action: Shares of Ciena rose 1.28% to $320.46 at the time of publication on Friday.
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