Interested in JDS Uniphase? Wait until the 2H/2012 to Invest
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
JDS Uniphase (NASDAQ: JDSU) provides test and measurement solutions and optical products for the telecommunications service industry. Its revenue is derived from the following business segments: communications test and measurement (47% revenue), communications and commercial optical products (37% revenue), and advanced optical technologies (16% revenue). But it is having problems attracting interested investors right now because it is a victim of a poor macro economy. Its clients just are not interested in spending right now.
So what should a long term investor do if he/she is interested in looking at JDS. The stock recently dropped from a high. It flirted with ‘15’ a few times and then retreated since the beginning of April to where it presently sits just above ’10.’ The recent drop might be a good ‘buy on a dip’ strategy. But when would be a good time to get in.
We can learn something about the stock by what a couple analysts think about it. Stifel Nicolaus has stated that according to its view point, JDS Uniphase’ results and guidance were reflective of a continued challenging service provider spending environment. F4Q12 (June) revenue guidance calls for increase, but the revenue range was well below Stifel’s expectations. Piper Jaffray reveals a little more when it mentioned that guidance fell short because of an ever present tight Telco spending environment. Telco exposure continue to indicate that carrier spending is set to resume growing in 2H12
Cisco (NASDAQ: CSCO) is struggling just like JDS as a rival company, so it shows that it is an industry wide struggle. Investors who have sold or withheld investing in the company fear it will not prosper anytime soon because its global market is too weak right now. Its July quarter guidance is weaker than analysts like and CEO John Chambers noted on the post earnings conference call that the company continues to see a “cautious, wait-and-see environment.” He said customers are wary of both conditions in Europe and the state of government regulation, presumably a reference to the upcoming U.S. elections. Part of this is due to IT spending but also telco spending. Some analysts like Piper Jaffray would consider turning from neutral to buy if it saw telco spending picking up. So Cisco is in the same boat as JDS.
Shares of JDS appear to be properly valued for A non-growth environment and the stock does look attractive based upon future growth opportunities. But its market appears hesitant to spend money right now. So the stock is not expected to grow in the short term so if one is interested in investing in the company, I would suggest waiting until underlying demand begins to firm.
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