Hi seldom blue, sorry to take so long to respond to your question regarding JDSU: To revisit, I thought JDSU was overvalued back about May 2 or so, and posted such, but without any backup for it. I did manage to post the following report over on iexchange a couple days before coming over here and making my due diligence-less claim. SO! Here's the basis for my claim, although I must say JDSU has held up better than I thought it would during this month. Goes to show you the strength that the optical networking industry holds right now.
Good trading,
Dan'o
JDSU - yes, I know they're growing at over 100% in terms of revenues per year. Currently, they're valued at
$74 billion though. That's just too rich for anything to go wrong over at JDSU for the next three years. Look
at it this way: They should have revenues (not earnings, mind you) of $1 billion or so this year. Extend that
at 100% for the next 3 years, and you'll have Revenues of $8 billion. If they can keep up their gross margins
at 50%, then the EBITDA figure is $4 billion. Well, all fine and dandy, especially for the IRS, which will
reduce that Est of FY2003 earnings to about $2.5 billion. On 700 million shares out (undiluted for now) that's
about $3 a share in by year end 2003. Today, JDSU trades at 33x that figure. This analysis precludes JDSU
from any further R & D advancements, and also assumes that LU and TERN and all the other giants of the
optical networking industry don't decide to have some sort of price war two years from now when demand
starts to taper off - just when supply ramps up. 50% gross margins don't go unnoticed by smart tech
executives, believe it. JDSU has come down from $150 to its current level of about $102, but its decline is
not finished yet. Better to stay on the sidelines and invest in a money market until you see a more realistic
valuation for JDSU being reflected. |
