Investing.com -- Shares of Ciena Corporation (NYSE:CIEN) dipped in pre-market trading on Monday after Morgan Stanley analysts downgraded the stock to “equal-weight” from “overweight”.

The analysts believe that while Ciena is well-positioned to benefit from the growing AI opportunity, the stock's recent rally has largely priced in near-term expectations.

They noted that the company's valuation has expanded this year, and further upside is likely to be driven by stronger earnings and the realization of AI-related revenue, which they see as more of a 2026 driver.

While Ciena has seen improved demand from cloud service providers and is working to capitalize on the growing demand for data center interconnect (DCI) solutions, the analysts cautioned that the recovery in the telecom sector may be slower than expected.

Additionally, the company's guidance for fiscal year 2025 appears to be at the higher end of its medium-term growth range, leaving limited room for upside surprises.

Despite the downgrade, Morgan Stanley maintained its price target of $63 per share, which implies a potential upside of around 18-19% from current levels.

The analysts reiterated their long-term bullish view on Ciena, given its strong position in the DCI market and potential to benefit from the AI revolution.

However, they believe that the near-term catalysts for significant share price appreciation are limited.

Related Articles

Morgan Stanley downgrade weighs on Ciena shares in pre-open trade

Earnings call: SSAB reports progress and challenges in Q3 results

Earnings call: Bankinter reports growth and resilience in Q3 2024