In a research report issued Friday, Wedbush analyst Scott Thompson maintained a Neutral rating on Ciena Corporation (NYSE:CIEN), while raising the price target to $27 (from $24). The increased price target comes after the company reported fiscal second quarter results that exceeded its preannouncement.

Thompson noted, “Our thesis and, for the most part, our estimates haven’t changed and the fundamental story seems to be playing out precisely as we had expected. 1H15 proved robust, and we still believe 2HF15 could be increasingly more challenging. While the shift in the cloud infrastructure space will benefit optical, it will also change the value proposition away toward results oriented IT.”

Furthermore, “Vendors without resources in compute, storage and networking will need to partner with those that do. For now, Ciena continues to post best-in-sector results as industry trends favor optical. Longer-term, having an integrated solution that will provide Opex and Capex savings and optimize application performance will likely trump best-in-breed technologies.”

“Ciena posted a very strong F2Q15, with metrics across all categories topping management’s preannounced levels announced just a month ago.” Also, “We expect these trends to continue. With Opex remaining stable, strong GMs are flowing directly to the OM line, which has allowed management to feel comfortable raising OM guidance from 8-9% to 9-10% for FY15.”, the analyst added.

Out of the 14 analysts polled by, 12 rate the stock a Buy, whereas only two rated it a Sell.With a return potential of 13.65%, the stock’s 12-month consensus target price stands at $28.40.


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