Investing.com -- Evercore ISI downgraded Ciena (NYSE:CIEN) Corp from Outperform to In Line on Tuesday, citing limited near-term upside after the stock’s significant rally.
Ciena’s shares have surged by approximately 30% in the past month, significantly outperforming the S&P 500’s 6% rise.
The stock is now trading near Evercore's price target of $65, prompting the analysts to take a more cautious stance.
“We are shifting our rating to In Line as the stock is trading around our price target,” said Evercore.
While Ciena remains “well-positioned to benefit from an improving telco and cloud spending environment,” Evercore noted that anticipated growth from artificial intelligence (AI) investments is likely a longer-term story.
“The magnitude of upside from AI investments outside of the data center (Coherrent solutions) is likely smaller and potentially a FY26/27 scenario vs. near-term,” the analysts explained.
Ciena has attracted investor attention as a potential AI beneficiary, but Evercore believes the benefits from AI may take longer to materialize.
“We think this dynamic will likely take longer to play out than many investors are currently anticipating.”
The firm said the company is seeing some impact from service provider spending tied to AI, such as the Lumen/Microsoft deal, but more substantial gains could come when coherent optics are used for shorter-range connections—likely around FY26 or later.
While Ciena is expected to grow alongside cloud providers in FY25 and benefit from a recovery in service providers, Evercore warns that investors may need to temper their expectations for near-term AI-driven gains.
“The run up in the share price has made us incrementally more cautious... we think it is possible that AI tailwinds take longer than expected to kick in.”
Evercore maintains its $65 price target on the stock but shifted to a more neutral outlook, concluding that “we see a more balanced risk/reward going forward.”