Comments from michael Murphy
Our Best New Money Buy is JDS Uniphase (NASDAQ: JDSU). JDSU reported earnings after the close on Thursday. When I made the stock a Best New Money Buy in mid-August, I said: "The company...is expected to lose a couple of pennies on $167 million in revenues. I think their guidance will be a big positive surprise. The consensus is looking for a loss of one or two cents per share on $198.5 million in the September quarter. That would be a good increase from $167 million. But I think they will guide for well over $200 million, perhaps as much as $235 million. If that's right, instead of losing one or two cents per share, they will guide for breakeven. That should mark the turn for the stock."
They reported $170.9 million in sales and did in fact lose a couple of pennies, pro-forma. They guided for $250 million plus or minus $10 million in the September quarter, so the low end of their range was above my $235 million. Considering they have July and August in the bag, it is obvious business is getting better and better, so even my bullish outlook based on information from a few weeks ago was too low. Acterna, which they just acquired, will only be counted for part of August and September, so there will be another bump up in the December quarter, probably to over $300 million. Roth Capital immediately upgraded the stock to a "buy," but I haven't seen revised September quarter earnings estimates from Wall Street yet. I don't see how anyone can be looking for a loss for this quarter after this. The company said they will breakeven on the low end of their revenue guidance. Oddly, the stock didn't react much on Friday, but I look for the turn to begin next week as analysts revise their models. The company will present at the Citigroup Technology Conference next Wednesday morning.
I received a subscriber question from Fred who wrote, "Just saw Google is quietly buying up fiber optic lines. Does this impact JDSU?" Well, if it's true, and they are buying dark fiber, which is certainly the rumor, the answer is "yes." The way to light the dark fiber lines is called JDSU. They put the equipment in that turns them on.
Another subscriber asked, "JDSU has appeared on the Financial Distress List produced by an economic consulting group. Outlook for 2007 is 100% probability for distress. Why do you think this is worth holding or purchasing more? Thank you, Kathryn"
Kathryn, I don't know which economic consulting group said this, but if you would email me their name, I would appreciate it. If you pay these people money for this kind of information, please ask them this question: "How can a company with $950 million in cash after the Acterna acquisition and no debt, that burns less than $30 million per quarter and is about to breakeven, have a 100% probability for distress within 24 months? At worst, they will have over $700 million in cash and no debt at the end of 2007." I don't think they will have an intelligent answer, and I don't think it was an intelligent statement. |
