11:57 AM EDT, 09/06/2024 (MT Newswires) -- Ciena (CIEN) underlying numbers remain soft, with an increased risk of "mis-execution" next year, BofA Securities said in a note emailed Friday.

"[Fiscal Q3] revenues beat [Wall Street] estimates but were down 12% YoY, and [Fiscal Q4] revenue growth guidance of -2.6% missed [Wall Street's] -0.5% expectations. Gross margin is also expected to be weaker, at [approximately] 43% versus [Wall Street's] 44.7%. We see greater risk of mis-execution next year," BofA said.

Wall Street's 8% fiscal 2025 revenue growth forecast requires a 13% to 18% increase in orders and a major rebound in service provider spending, but with limited historical stock performance and current risks, upside potential is constrained, according to the note.

Ciena has promising long-term growth with expanding roles in Data Center Interconnect and increased optical use, benefiting from cloud investments and strong demand for WaveLogic 6 and 800G ZR, BofA said.

However, near-term challenges include managing large inventories and cautious spending, with the company's fiscal Q4 guidance suggesting a potential decline in orders and risks to the fiscal 2025 revenue growth estimate.

BofA downgraded Ciena to neutral from buy while maintaining its $59 price objective.

Price: 51.70, Change: -0.73, Percent Change: -1.39