Nutanix's (NASDAQ:NTNX) stock rose about 3% premarket on Monday after Morgan Stanley upgraded the shares to Overweight from Equal-weight.

Separately, the firm downgraded Ciena (NYSE:CIEN) to Equal-weight from Overweight.

Nutanix (NTNX): Analysts led by Meta Marshall said that Nutanix is positioned well to take share from the more than $5B VMW franchise, with upcoming VMware renewals, Dell (DELL)/Cisco (CSCO) partnerships, and architectural changes as catalysts.

Broadcom (AVGO) had completed its acquisition of VMware last year.

The analysts noted that Nutanix's opportunities for share gains from VMware are getting nearer. They see an opportunity for Nutanix to gain between 1% to 2% annually from VMWare's install base over the next five years, enhancing the Nutanix's growth rate by 200-500 bps and setting up an attractive opportunity at current valuation.

The analysts added that they were previously more cautious around timing, mainly due to the requirement for a server upgrade (e.g. about 80% of VMware's installed base is still on a 3-tier architecture).

However, currently they have become more positive due to the following reasons — channel expansion with Cisco and Dell, as well as incentives are seeing traction; PowerFlex deal with Dell removes a potential hurdle to adoption (e.g. it allows Nutanix to work with certain 3-tier architectures); it is almost a year since the closing of the Broadcom-VMWare deal, meaning contracts are further to expiration.

The analysts added that while the last two reasons are not likely to be drivers of upside until later in FY25, channel expansion and continued upside to free cash flow, or FCF, valuation make them more comfortable now.

The firm has a $72 price target on Nutanix's stock.

Ciena (CIEN): Marshall and her team believe Ciena is well-positioned for the Al opportunity, with increased investor recognition of this having steered the stock up around 45% year-to-date. They see upside to long-term estimates driven by Al, but think that meaningful upside to near term expectations is more limited due to the re-rating.

The firm downgraded the stock to Equal-weight with a $63 price target on the share of Ciena — which provides networking systems, services, and software.

The analysts noted that while they continue to see Ciena's multiple expansion year-to-date as recognition of their Al/Data Center Interconnect, or DCI, opportunity, they think valuation appreciation from here will largely be on the back of higher EPS.

With the Street already at about 8% revenue growth for FY25, at the high end of medium-term 6% to 8% revenue growth rate, guidance north of Street is something they are more cautious of heading into the fourth quarter earnings in December, the analysts added.

The analysts said that they could be too conservative if Al attributed revenue is meaningful in FY25 or telecom recovery is stronger than expected coming out of inventory digestion.

Ciena' stock fell about 3% premarket on Monday.