Ciena Corporation shares traded roughly 1.1% higher on Thursday following a substantial bump in the firm's price target from Bank of America. The bank raised its target to $550 from $355 and maintained a Buy rating on the optical networking specialist.
Bank of America framed Ciena as a key beneficiary of structural investment tied to artificial intelligence and broader data center bandwidth needs. Analyst Tal Liani described the company as sitting at "the heart of an optical super-cycle that is expected to continue well into 2027," driven by rising bandwidth demands across AI and non-AI data centers.
Among the specific demand indicators BofA highlighted was a $2 billion increase in Ciena's backlog last quarter, bringing the total backlog to $7 billion. The bank also cited hyperscaler capital expenditure forecasts, projecting a 65% year-on-year increase in 2026 after a record 70% expansion in 2025, as evidence of sustained demand.
Reflecting that outlook, BofA raised its revenue growth estimates for Ciena to 28.5%, 21%, and 20% for the next three years. Those projections were lifted from prior estimates of 27.9%, 18%, and 16.5%, respectively.
The new price target is underpinned by a 62x CY27 price-to-earnings multiple, a valuation the bank links to what it calls Ciena's "strong position for scale-across interconnect networks" and the company's longer-term opportunities for optical deployments.
In the AI networking segment specifically, BofA ranked Ciena among "the more attractive growth prospects." The bank expects Ciena's share of 800G ZR pluggables to increase from roughly 30% in 2025 to at least 50% in 2026, even as that market expands roughly tenfold.
Market performance to date has been notable: the stock has surged almost 100% year-to-date. BofA, however, observed that the shares are "currently trading on growth momentum rather than a traditional profit multiple."
Key takeaways
- Bank of America raised its price target to $550 from $355 and reiterated a Buy rating.
- BofA projects continued optical networking demand through 2027, driven by AI and data-center bandwidth needs.
- The bank raised revenue growth forecasts and highlighted a larger backlog and rising hyperscaler capex as demand indicators.
Risks and uncertainties
- Valuation risk - BofA notes the stock is trading on growth momentum rather than a conventional profit multiple, which could affect investor expectations in the event of slowing growth.
- Demand sensitivity - continued expansions in hyperscaler capex are cited as a driver; any alteration in that spending trajectory could change Ciena's near-term outlook.
This reporting focuses on the bank's published views and Ciena's market reaction. The information presented reflects the figures, forecasts and direct quotes attributed to Bank of America and the company as reported, without additional inference beyond those statements.