Image Source: NeoPhotonics.

What: Shares of NeoPhotonics Corp (NPTN) were surging Monday alongside other fiber optics technology specialists including Lumentum Holdings (LITE 1.57%) on a bullish industry note from analyst firm Needham & Co. As of 1:04 p.m. EDT, NeoPhotonics shares were up 17%.

So what: The Needham analysts said they saw a "mega cycle" coming in fiber optics networking, adding that the rise of China, metropolitan networking market, and data center proliferation in cloud computing would contribute to a boom in demand.

The analysts noted that the "bulk of the optical components industry" is sold out already, meaning the spike in demand should propel a significant increase in orders.

Now what: Needham lifted its rating on the group of four stocks to Strong Buy, which also includes Infinera Corporation (INFN 1.38%) and Oclaro (OCLR) as Oclaro and Lumentum both rose about 8% on the upgrade.

Needham placed an $18 price target on NeoPhotonics, giving it an upside of nearly 40%. As the smallest company of the group, NeoPhotonics would seem to have the most to gain from a spike in demand, and after already beating estimates four quarters in a row, the upgrade bodes well for the company's growth. NeoPhotonics has historically been a volatile stock, but Needham makes a compelling case. While the triple-digit P/E  scare away some investors, the company's long-term prospects look strong.