Ciena (CIEN) is expected to continue to post revenue upside in the coming quarters because of healthy data center interconnection demand, Morgan Stanley said in a Tuesday note.
However, the earnings per share growth that would come along with the revenue upside is not "meaningful" given the degree of gross margin upside already calculated in Wall Street estimates, Morgan Stanley said.
Building on this, Morgan Stanley said Ciena's entry into the 400ZR market has been late with already established players present. Ciena does not have the scale they would have need to put forward a better margin product, the analysts said.
Morgan Stanley downgraded its rating to underweight from equal-weight on Ciena and lowered its price target to $70 from $73.
Price: 78.96, Change: -1.18, Percent Change: -1.47
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