Needham cuts Ciena stock price target on margin outlook

Needham has reduced its price target for Ciena Corp. shares to $520 from $600 while keeping its Buy rating. The telecommunications equipment company reported stronger-than-expected fiscal third-quarter 2026 results. Adjusted earnings per share were $2.11, surpassing expectations of $1.72. Revenue reached $1.67 billion, up from the estimated $1.63 billion.

Ciena's two biggest customers, Meta and Google, drove sequential growth, accounting for all of it and making up 41.7% of total revenue. Despite supply constraints, bookings suggest fourth-quarter book-to-bill will exceed 1.8. Analysts forecast fiscal 2027 revenue growth above 30% with modest gross margin expansion. Ciena's stock is currently at $315.66, down 11% over the past week.

The stock has risen 274% over the past year, with a PEG ratio of 0.33 indicating an attractive valuation relative to its growth. However, InvestingPro's Fair Value analysis suggests the stock may be overvalued. Ciena's management expects revenue between $8.3 billion to $8.4 billion for fiscal 2027, with potential further growth if supply constraints are resolved.