Ciena Stock Price Targets Raised by Jefferies and Morgan Stanley

Investing.com — Jefferies and Morgan Stanley have raised their price targets on Ciena (NYSE:CIEN) stock, following the company’s recent webcast which elaborated on AI's influence on its business strategy.

Jefferies analysts increased the price target from $65 to $80, highlighting the company's structural advantages in the optical sector and promising growth prospects linked to AI. The new target reflects a valuation of 22.7x the estimated earnings per share (EPS) for the calendar year 2025, up from 15.4x.

Analysts expressed enthusiasm for Ciena's traffic growth projections spurred by cloud and AI technologies, which they believe could outpace the historical growth rate of 25-30%. They pointed out that while AI-related traffic growth is currently confined to data centers, the limitations of GPUs will eventually require expansive optical network connections.

> “While most of today's AI traffic growth is contained inside the Data Center, power, space, and cooling constraints associated with GPUs make it clear that clusters will eventually have to be spread out – connected by Optical networks,” wrote Jefferies analysts.

Morgan Stanley also expressed optimism about Ciena's growth, particularly regarding its intra-data center connections and long-haul direct current interconnect (DCI) capabilities. They have raised their price target from $60 to $63.

The firm noted that the adoption of coherent technology in data centers might further stimulate Ciena's growth trajectory, potentially surpassing the usual 6-8% growth range. Analysts deem the upcoming expansion of Coherent technology into data centers, projected for 2026, as an “incremental market opportunity.”

> “While timing of seeing upside to medium term targets from AI still uncertain, in combination with service provider recovery, pluggables, routing, MOFN, we feel like there are opportunities for upside in FY25 that leave us Overweight, with some AI drivers likely coming after that,” they commented.

After this news, Ciena shares saw a modest increase of approximately 0.8% when the market opened on Wednesday.