Yes. Uniphase has traded in the past for a little over one times sales and a pe under 14. This is a BEAR market and therefore we have to assume that it MIGHT get that low again. Surely those who were buying at 60, 50, 40, etc weren't paying attention to valuation.
The economy continues to slow down. Foreign economies as well. Debt abounds at the telcos. Until this can be turned around, the whole sector will not rise, but rather form a base, perhaps lasting a year as the stock grows into valuation. Margins especially for passive components are under pressure. Jdsu has some of the best optical scientists in the world and I expect that they can either recruit what they need or buy it on the cheap, so I see them as one of the best players in the sector, under temporary but perhaps prolonged pressure.
Estimates are for jdsu to sell 2.3 Billion this year. They have declined to give estimates for next year but published estimates are for 4.7 Billion in sales. Not sure they'll make that much given they've seen such drastic reductions, and the fact that telcos are not increasing capex at the current time, but assuming that they do, trough values would put jdsu at somewhere around 5 Billion in market cap based on forward sales (Under $4 per share). Next year's earnings are estimated to be .13 giving them trough valuations under $2. Add in cash of 1.5 per share and we're back to under $4. If they can't sell that much, perhaps it trades lower for a while. Think it cannot happen? There are plenty of FO plays trading for cash or less.
Overhead supply will put pressure on any rallies. Unless Jdsu comes out with some good news, I do not see the stock staging a significant sustainable rally. It MIGHT have seen the lows and it might not. It's too early to tell that.
I'll buy this stock, but after it's established a long base, comes out with good news (yes I may miss a $5 move), or trades at lower valuations.
I can wait. |
