May 23, 2001
Morgan Stanley Dean Witter & Co. analysts this morning downgraded Ciena Corp. (Nasdaq: CIEN) shares after the stock had closed in on the firm's price target of $65.
Ciena shares this morning fell 2.32 (3.61%) to 61.98.
The shares were downgraded to a Neutral from an Outperform rating. The analysts, who include David Jackson, Alkesh Shah, and Arij Mawji, said they were doing so out of concern for valuation.
"We recognize that Ciena remains the best-positioned company in the optical sector. However, our valuation work suggests the stock has limited upside from current levels," wrote the analysts in a report.
"Sprint's spending is at risk, we believe. Our industry checks indicate that Sprint [NYSE: FON] could delay network upgrades. We estimate that Sprint accounted for 20 percent to 30 percent of Ciena's [first quarter 2001] revenues."
Morgan estimates that the metro DWDM contract with AT&T Corp. (NYSE: T), announced yesterday, is worth roughly $40 million to $50 million but was already accounted for in the management's 2001 guidance. The analysts expect that AT&T will likely expand business with Ciena in the optical switching area.
— R. Scott Raynovich, Executive Editor, Light Reading
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