Bullish analyst calls piled up all week on one optical networking name, and now the stock is surging while its closest peers barely budge. Here is what the sell-side sees that the market is only starting to price in.
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A week of upbeat sell-side research on artificial intelligence (AI) networking is showing up in shares of Ciena (NYSE:CIEN | CIEN Price Prediction). Ciena stock is at $371.68, up 6% in early trading action. With the company itself quiet on news, the gain looks like the market catching up to a sell-side re-rating of Ciena stock that’s been building for a week.
Meanwhile, shares of fellow AI networking supplier Arista Networks (NYSE:ANET) are at $205.30, up 0.8%. Cisco Systems (NASDAQ:CSCO) stock is holding steady at $107.94, up 0.3%. That split leaves Ciena stock out in front of the networking group by a wide margin.
Tech names are stronger overall, with the iShares U.S. Technology ETF (NYSEARCA:IYW) at $265.36, up 0.2%. In contrast, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is at $760.92, down 0.2%.
Evercore and Bernstein Make the Optical Case
Evercore ISI analyst Amit Daryanani upgraded Ciena stock to Outperform late last week and raised the firm’s price target to $550. Daryanani’s argument is that an AI system runs only as fast as the chips inside it can exchange information across server racks and between data centers. When those connections fall behind, operators lose efficiency. They struggle to get full use of equipment they’ve already paid for, and Daryanani sees the opportunity in Ciena’s optical networking technology, which moves that traffic inside data centers and over longer distances.
Bernstein added to the momentum in the previous session, launching coverage of Ciena stock at Outperform as part of a positive rollout across the U.S. networking group. In that research, Bernstein told investors that networking and optical companies stand to be structural winners within AI infrastructure. Both calls point at the same bottleneck, and Ciena sells the optical transport that lets data centers, and the links between them, keep pace with the compute being installed around them.
Ciena’s Own Re-Rating Stands Apart From Its Peers
Ciena stock is up 59% year to date, so the two analyst calls are landing on a name that has already run a long way. Evercore ISI’s higher price target arriving after that kind of climb raises the bar into strength, at a point when the market was already rewarding Ciena’s optical franchise.
Arista and Cisco shares are barely moving alongside Ciena stock, suggesting the market views the analyst calls as specific to Ciena. Extreme Networks (NASDAQ:EXTR), a smaller enterprise networking peer, rounds out the group.
Both firms point to a bottleneck supporting the bullish thesis, where every new rack of AI chips depends on faster optical links (we highlighted seven suppliers solving exactly these AI expansion bottlenecks, from power to networking, in a free report here). Much of that story may already be priced in after this year’s run, so any slowdown in AI infrastructure spending could weigh on the shares.
What to Watch Next
It’s worth watching whether other firms follow Evercore ISI and Bernstein with bullish research on Ciena. Any pickup in Arista or Cisco shares toward Ciena’s pace could signal the buying is spreading across AI networking.
Anyone sizing up their exposure should adjust their holdings carefully given that Ciena stock is up 59% year to date and the latest price target raise arrived into strength. Keeping one’s Ciena stake moderate leaves room to benefit from the AI networking demand case both firms laid out while limiting the damage if momentum in CIEN stock fades.
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