Why Ciena Stock Popped 5% on Monday

Motley Fool09-23

Citigroup flipped from sell to buy on Ciena stock this morning. Weak sales of telecom equipment in 2024 could inflect to sales growth in 2025. Despite the good news, Ciena stock costs ...

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But in 2025, that trend should reverse to show 3% growth in capital spending.Why Citigroup loves Ciena stockMore details on the upgrade: Ciena stock has been suffering from a supply glut of telecom equipment that's weighing on sales and depressing profits. Last quarter, Ciena's sales slid 12% year over year, while earnings cratered 52%.As StreetInsider reports today, though, the inventory glut is having a \"diminishing impact\" on Ciena's business, and as demand for the company's products revives, Ciena could enjoy mid- to high-single-digit sales growth in 2025 -- even above the industry average.The analyst notes that Ciena's outsize role in supplying networking equipment to cloud service providers will help drive growth. Additionally, the analyst expects investors to begin rotating out of semiconductors in search of cheaper ways to play the rise of artificial intelligence technology.Is Ciena stock a buy?In this regard it's important to note that Citi doesn't expect Ciena to benefit immediately from AI work. That's more of a longer-term trend for the stock. And in the near term, I'm not convinced the stock's 30 times FCF price-to-free-cash-flow ratio is quite cheap enough for a forecast of mid- to high-single-digit sales growth.When you consider furthermore that the stock sells for an even more expensive-looking 61.5 P/E ratio -- a more common measure of valuation -- the case for buying Ciena stock today looks even weaker. Just because Citi might be right about telecom equipment sales improving doesn't mean it's right that you should buy Ciena stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2469149563"}