Ciena’s JGA cable upgrade puts AI traffic in focus for investors

Ciena (CIEN) is back on investor radar after partnering with Lightstorm to upgrade the Japan, Guam, Australia submarine cable system, using its WaveLogic technology to support multi terabit AI training and inference traffic.

The recent JGA cable upgrade headlines arrive as momentum in Ciena’s shares has been strong, with a 1 month share price return of 20.1% and a 90 day share price return of 125.1%. Over 1 year, the total shareholder return is about 7x.

If this kind of AI infrastructure story interests you, it could be worth broadening your watchlist using our screener for other network and data center enablers across 38 AI infrastructure stocks

With Ciena’s shares up sharply in recent months and trading at a premium to the average analyst target, the key question is simple: is the market getting ahead of itself, or is it still underestimating future growth?

Most Popular Narrative: 51.3% Overvalued

The most followed Ciena narrative pegs fair value at $340.94, well below the last close of $515.85. This puts a spotlight on how much future growth is already priced in.

Major cloud providers and a new wave of neo scalers are aggressively investing in high capacity, low latency optical networking infrastructure to support AI workloads, driving multiyear, global network buildouts that should significantly expand Ciena's addressable market and underpin sustained, above trend revenue growth.

Want to understand why this story still supports a much lower fair value than today’s price? The narrative leans on faster revenue expansion, rising margins and a future earnings base that needs a rich valuation multiple to hold everything together.

Result: Fair Value of $340.94 (OVERVALUED)

However, concentration in a few large hyperscaler customers and rapid tech shifts toward open or disaggregated networking could quickly challenge the AI networking upside investors are banking on.

Another View: What the Sales Multiple Is Saying

There is also a simple sales based yardstick to consider. Ciena trades on a P/S of 14.2x, which looks cheaper than peer companies at 20.1x, yet far richer than the broader US Communications group at 2.6x and a fair ratio estimate of 6.8x. Is the market overpaying for AI exposure, or underestimating future sales power?

Next Steps

With mixed signals on value, growth and AI exposure, it makes sense to move quickly, test the numbers yourself and shape your own take on the trade off between upside potential and the concerns already emerging, starting with our breakdown of 2 key rewards and 1 important warning sign

Looking for more investment ideas?

If Ciena has you thinking about where AI and infrastructure could lead next, it makes sense to widen your search so you are not relying on a single story.

• Spot potential value opportunities early by scanning companies that combine quality fundamentals with attractive pricing using the 54 high quality undervalued stocks
• Prioritize resilience and sleep better at night by focusing on businesses with sturdier financial footing through the solid balance sheet and fundamentals stocks screener (42 results)
• Balance growth aims with ongoing income potential by reviewing companies screened as reliable payers in the 13 dividend fortresses

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.