Smith Barney raises price target to $300>
JDSU: Raising Estimates and Target to $300 on Strong 2Q
JDS Uniphase Corp(JDSU)*
Rating: 1H
19990714
Salomon Smith Barney ~ January 27, 2000
01/27/00 JDS Uniphase (JDSU $216.89,1-H,Tgt $300.00) Lissa Bogaty
--SUMMARY:--JDS Uniphase--Connectors & Other Components
*Solid upside (EPS of $0.18 compares to $0.15 consensus) on over 100%
revenue growth in the base business.
*Internal revenue growth consistent with last quarter, above guidance.
*We think 10G will be a significant driver of the business going forward.
*Raising estimates and price target to $300 from $160. We continue to
believe estimates are materially too low.
*Reiterate Buy (1H) rating.
01/27/00 JDS Uniphase (JDSU $216.89,1-H,Tgt $300.00) Lissa Bogaty
--EARNINGS PER SHARE--------------------------------------------------------
FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year
Actual 06/99 EPS $0.07A $0.08A $0.10A $0.12A $0.37A
Previous 06/00 EPS $0.14A $0.16E $0.17E $0.18E $0.65E
Current 06/00 EPS $0.14A $0.18A $0.20E $0.22E $0.74E
Previous 06/01 EPS $0.19E $0.22E $0.24E $0.26E $0.91E
Current 06/01 EPS $0.24E $0.26E $0.28E $0.31E $1.10E
Previous 06/02 EPS $N/A $N/A $N/A $N/A $N/A
Current 06/02 EPS $N/A $N/A $N/A $N/A $N/A
Footnotes:
01/27/00 JDS Uniphase (JDSU $216.89,1-H,Tgt $300.00) Lissa Bogaty
--FUNDAMENTALS--------------------------------------------------------------
Current Rank........:1H Prior:No Change Price (01/26/2000)....:$216.89
P/E Ratio 06/00.....:293.1x Target Price..:$300.00 Prior:160.00
P/E Ratio 06/01.....:197.2x Proj.5yr EPS Grth...:50.0%
Return on Eqty 99...:N/A% Book Value/Shr(99)..:23.87
LT Debt-to-Capital(a)0% Dividend............:$N/A
Revenue (00)........:1134.10mil Yield...............:N/A%
Shares Outstanding..:179.5mil Convertible.........:No
Mkt. Capitalization.:38931.8mil Hedge Clause(s).....:
Comments............:(a) Data as of the most recently reported quarter.
Comments............:
01/27/00 JDS Uniphase (JDSU $216.89,1-H,Tgt $300.00)
--OPINION:------------------------------------------------------------------
QUARTER AHEAD OF FORECAST ON OVER 100% INTERNAL REVENUE GROWTH--EPS UP
120% WITH ACQUISITIONS--RAISING ESTIMATES AND PRICE TARGET TO $300
JDS Uniphase reported earnings last night of $0.18 versus $0.08 pro forma
last year (excluding goodwill), up 120% on 119% revenue growth.
Excluding the incremental contributions from a partial quarter of EPITAXX
and Sifam, we estimate 115% revenue growth year over year, and 20%
sequentially, the sequential growth equaling that of last quarter. This
compares to our $0.16 estimate and the consensus $0.15, the upside driven
by revenues that were over $10 million above our forecast at $282
million. The strong top line flowed through to earnings as the company
reported a slightly above-plan gross and operating margin, as well.
WE EXPECT CONTINUED ESTIMATE REVISIONS...
Management guidance has been and remains 15% internal growth on a
sequential basis, yet it is not unlikely, in our view, for the company to
continue to post 20% sequential internal growth, given the multitude of
opportunities it is exploiting. We would expect continued upside on the
continued strong sequential growth of the business and as the company
continues to make accretive acquisitions. Furthermore, JDS Uniphase has
been able to consistently translate top-line growth into bottom-line
growth that tracks revenue increases.
...ALLOWING THE STOCK TO KEEP WORKING
We believe that the potential for continued upside revisions (we are now
raising our fiscal 2001 estimate by 20%) will allow JDSU to maintain its
current multiple, which we believe is overstated, as forward estimates
are likely materially too low. Using the current multiple on calendar
2000 earnings on our new calendar 2001 estimate of $1.30, we arrive at
our $300 price target, raised from $160, and Buy rating.
10G SHOULD BE A SIGNIFICANT DRIVER OF THE BUSINESS
The strong acceptance by service carriers of 10G (OC-192) systems
(desiring to upgrade from 2.5G (OC-48)) has left equipment providers
scrambling to catch up with Nortel, which enjoys the major share of the
OC-192 market. Nortel reported on its last conference call that over 50%
of its optics business is now 10G. On the conference call last night,
JDS Uniphase reported that 10G represented about 5%-10% of total
modulator sales last year, running closer to 50% today, with expectations
for that number to grow to 80%-plus by the end of the year for long-haul
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