Keith,
I think a net margin of 10 - 20% is optimistic for JDSU. I am not saying they can't attain it, but they really have very little track record outside the bubble boom and bust and in more normal times competition pressures net margin.
I think a PE of 30 - 60 is optimistic for JDSU and the same reasoning holds as for net margin.
I think these optimistic objectives suggest that a future P/S of 6 is similarly optimistic. The math from a previous post showed that the net margin and PE objectives could produce a P/S from 3 to 12.
I argued for a P/S of 6, which is $6 of share price for each $1.5B of sales. Add $0.60 for Lizzie's cash. Your "higher amplitude rebound" gives a larger multiple of $1.5B sales and a larger multiple of $6. The maximum quarterly revenues was ~$900M. Annualized, that is $3.6B. That gives a $14.40 share price if the P/S is 6. Add Lizzie's $0.60, and you get a round $15.
I am interested in JDSU, that's why I read this thread and follow it in my Yahoo "Network" portfolio. I bought and sold some in 2001, but, since then, I have suggested that purchases be postponed until sales stopped falling and showed signs of recovering. Certainly, "signs of recovery" should afford some visibility on what revenue level and what future date will see break even results.
When "signs of recovery" are firmly in place, there will be time to try to evaluate the future. Technology is a fast moving, changing landscape. In the current "no business" environment, it is more difficult than usual to gauge current competitive advantages and it is not that useful since things could change before there is a real business recovery. JDSU has been "downsized" very dramatically. Again, in the "no business" environment, these radical changes are not being tested in the competitive arena.
So JDSU is a shadow of its bubble self and a bubble is not the environment that really tests the mettle of management and competitiveness. The future is very uncertain. Both the date of real recovery and JDSU's ability to participate then are question marks.
If JDSU is part of a diversified basket of beaten down tech stocks that you are holding long term as the speculative portion of your portfolio (top 5% of the pyramid), then OK. If JDSU represents a large percent of your investments, I think you are assuming too much risk. |
