Ciena Corporation (NYSE:CIEN) shares are trading lower on Monday. JP Morgan analyst Samik Chatterjee downgraded the company to Neutral from Overweight with a price target of $65.

The analyst writes that the downgrade is due to current valuations overlooking key factors that limit EPS upside, including constrained telco spending, limited gross margin levers compared to peers, and lower exposure to cloud capital expenditures.

Chatterjee says that the capex growth outlook for U.S. telcos is muted for 2025, with international telcos also lagging in recovery.

The analyst notes that Ciena's telecom revenues are currently 9% below pre-pandemic levels, while North American telco capex is down 8%, indicating limited potential for Ciena to significantly outperform these trends.

For FY25, the analyst expects revenue growth to align with the long-term rate of 6%-8%, as telecom spending remains constrained, contrasting with prior years of outsized growth driven by pent-up demand from network underinvestment.

This month, Ciena authorized a three-year share repurchase program, starting in the 2025 fiscal year.

Investors can gain exposure to the stock via SPDR S&P Telecom ETF (NYSE:XTL) and iShares U.S. Telecommunications ETF (BATS:IYZ).

Price Action: CIEN shares are down 3.93% at $64.07 at the last check Monday.

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