On Thursday, Needham, a notable financial firm, upgraded the price target for CIENA Corporation (NYSE:CIEN) shares to $65 from the previous $60, while reiterating a Buy rating on the stock.
The firm's optimism is based on an improved outlook for CIENA's critical Webscale segment, which has shown signs of growth due to several strategic new design wins.
CIENA, a network strategy and technology company, experienced a robust fiscal year 2023, with direct Webscale revenue growing by an average of 57% year-over-year. However, this growth decelerated to 13% in the first half of fiscal 2024.
Despite this, Needham anticipates that inventory replenishments and new design wins will drive quarter-over-quarter growth to pick up pace, although the year-over-year comparisons may be challenging.
The firm acknowledges that other customer segments for CIENA might not see significant improvements. Nevertheless, Needham believes the company has a substantial mid-term growth opportunity.
This potential is attributed to various factors, including capacity upgrades through WaveLogic6, new 400ZR, and 800ZR data center interconnect (DCI) wins, as well as potential advantages stemming from the merger of Nokia (HE:NOKIA) and Infinera (NASDAQ:INFN).
The increased confidence in CIENA's execution capabilities comes ahead of the company's earnings report before the market opens on September 5, 2024. Needham's revised price target reflects this sentiment, indicating a positive outlook for CIENA's financial performance in the near future.
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