Thomas Weisel Downgrades Ciena, Slashes Price Target

Thomas Weisel Partners analyst Hasan Imam downgraded Ciena(CIEN Quote) to buy from strong buy and sharply reduced his six-month price target on the company in a series of moves that were based primarily on the market psychology surrounding the optical networker.

Imam, who slashed his price target to $45 from $85, wrote in a research note that near-term concerns about the company have little to do with Ciena's fundamentals, and the analyst said he still holds an "unflinching bullish stance" on the company. But he wrote that "it is becoming increasingly clear that investors, spooked by recent blow-ups of equipment vendors Nortel(NT Quote), Tellabs(TLAB Quote), Juniper(JNPR Quote) and Marconi(MONI Quote) are becoming increasingly skittish on Ciena, one of the last ones standing, and are no longer willing to reward the stock for near-term execution."

He added that there is no near-term catalyst in sight to propel Ciena's stock higher, save a sector-wide rally. Despite the recent troubles in the sector, Ciena has outperformed its peers, maintaining guidance "of +100% growth for FY01 and has delivered upside to expectations through 1H01," Imam wrote.

Ciena has fallen 64% for the year, to date. The shares have lost 44.7% in just the past month. But Imam believes that the stock has bottomed at current levels (Ciena closed yesterday at $29.32), and he sees roughly a 40% upside over the next six months. "In the longer term, we believe Ciena remains one of the best-positioned companies in the optical networking sector," he wrote.

Imam also reduced his revenue estimate for fiscal 2002 to $2.309 billion from $2.842 billion, and he cut his earnings forecast to 99 cents a share from $1.20.

Just yesterday, Goldman Sachs analyst Natarajan Subrahmanyan said he was still cautious on the telecom sector as a whole, but indicated that he believes Ciena and ONI Systems(ONIS Quote) will likely report strong second-quarter results in the coming weeks.