Apt metaphor. Icarus forgot who he was and his hubris did him in. Or at least that's how I remember the tale. In the case of fiber optics stocks, it's the investor --- or should I say momentum player --- who forgets there are other gods besides logic. Yes, the sector will continue to grow but that doesn't meant the stock's price will go up in a straight line. Anyone who followed QCOM between '96 and '98 knows exactly what I mean.
Having said all this, I have to admit JDSU and SDLI are two stocks I don't want to be out of completely.
As for the competition between them, it's not really apples-to-apples as the former is so much larger than the latter.
The pro forma met earnings for each company's most recent quarter are as follows (taking JDS and UNPH separately):
SDLI --- $5.9 million or $0.18, for a 380% gain y/y.
JDS --- $22.9 million or $0.29, for a 144% gain y/y.
UNPH -- $18.8 million or $0.43, for a 67% gain y/y.
Factoring in acquisitions, SDLI earned $0.10 and UNPH lost $4.80.
It's important to note the undersea market is not easy to penetrate because of the rigid tests involved to qualify each product. Once a company passes, they become entrenched. SDL's long history in satellite technology has given them an edge as standards are similar.
Based on SDL's recent conference call, it's clear the 10 gig modulator market is the next to watch. They're predicting some build-up in Q3 and major ramp in Q4 and beyond.
I continue to believe both companies will succeed. With every country in the world set to upgrade its fiber optic networks, there's more than enough work to go around. And if anyone's worried about SDL's size, all he or she needs to do is consider their vendors --- Alcatel, Lucent, and Corning --- find it no problem at all. I figure the worst that could happen is that they'd be taken out.
Going back to your post, I agree it's important to separate the companies from the stocks when determining an entry point. Even gorillas get haircuts when the market corrects.
Long term optimistic, short term cautious.
Pat
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