Give them a very generous price-to-sales ratio of 3 given current situation.
Two problems with your analysis.
1- Leading Comm IC companies in related segments like AMCC, PMCS, VTSS etc. bottom out at 5x-7x sales. Since JDSU is the absolute leader in optics, it's easy to argue that they should bottom at the high end of that range.
2- Usually when comparing trailing sales, you use the previous 12 months, not the annualized trough quarter. So you should use $2.4 billion or so for JDSU's trailing sales, not $350 million x 4.
In a nutshell, JDSU is cheap here. It may temporarily dip lower, but unless all the telecom equipment companies declare bankruptcy you're going to make money buying JDSU in the single digits. Who knows when orders for optical systems will turn back up, but it seems unlikely they can fall much further. NT only did $300 million in system sales in June. If, amazingly, Sep is actually lower, then December has got to turn up (it seems!). I wouldn't be surprised if September optical sales are up over June, but we'll see. Once optical system sales show sequential improvements, all these stocks will be off to the races.
Elroy |
