Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: FR1 who wrote (22433)	3/9/2002 3:52:44 PM
From: Timetobuy	Respond to of 24042

No. ROFLMAO! That's way too complicated for me, FR1. First off. Capex has many components. So to say that jdsu will get X% is probably not a good assumption. Capex right now is a moving target! So far it's been moving down, but I think that it's most likely in the bottoming process. There is only so much that can be cut. However, we still have the problem of debt. That can't be underestimated and rates are rising. This both helps and hurts jdsu. It's customers who have debt, pay more to service it, making them want to put off spending and have a harder time refinancing or adding new debt, while jdsu potentially makes a little more in interest (but not likely enough to offset the small burn rate it's got). Now when capex resumes, it won't be even. Some companies will benefit more than others. Even if capex were to rise 10%, some players are going to get a bigger piece of that pie. The trick is to figure out who those winners are. A smaller company can outperform jdsu if it gets a nice rise in orders and given that they currently sell for lower p/s than jdsu, there is probably more upside in one of those companies than jdsu at a p/s of 6. (This is where the law of numbers come into play). Jdsu could double sales (another 1.3 BILLION) and be at a p/s of 3, whereas a company selling only 200 million with a current p/s of 1 or 2 seeing orders double to 400 million gets to a p/s of 3 by seeing their stock go up 3-6 times. Imagine what would happen to the stock if THEY were to get to a p/s of 6 on a doubling of orders!) Do you see why a big player, although most likely a survivor, may not be the biggest beneficiary in terms of stock movement when capex does rise? This is where valuation and some luck come into buying a stock in the sector. Historically speaking (pre bubble and over many years) a p/s of 6 is on the high side. Given that the rebound is likely to be modest and margins probably are not coming back to their peak, I view the valuation as on the high side especially since Jdsu is trading for a premium to others in the space. (A premium is probably warranted given it's size, brain power and cash), but it's still pricey. I would say that jdsu is a survivor and most likely a thriver down the road, but in the short term it's on the expensive side. If I were to rate the stock I'd say it's a hold in the short term (I wouldn't buy shares here and I wouldn't sell them either), maybe buy it if it were to trade lower because the best companies typically don't sell down to the valuation of second tier players. What would change my opinion of the short term? Lower share price with fundamentals not deteriorating or improving fundamentals (margins, revenues, earnings). The little FO players have been rallying probably in hopes of a buyout. Some may be bought, a few may stay independent and be real winners in the years to come and some will probably go bust. They are much higher risk, but higher reward as well. They aren't in as poor a shape as some of the dot.bombs though. Most of these little companies are cash rich, something the dot.gones ran out of.