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Analyst Blog

On Dec 13, we maintained our Neutral recommendation on JDS Uniphase Corp. (JDSU - Analyst Report). The company reported mixed financial results for the first quarter of fiscal 2014. The bottom line was in line with the Zacks Consensus Estimate while the top line surpassed the same.

Why Kept at Neutral?

JDS Uniphase’s newly-launched products coupled with the acquisition of Network Instruments and Arieso are the long-term positives for the company. Moreover, higher Internet usage and associated applications has spurred demand for components and modules used in 3G/4G high-speed communication networks, benefiting JDSU in the long run.

Moreover, growing demand for next generation pigment solutions called SPARK, which is mostly used in banknote designs in nearly 44 countries, coupled with recent contract wins in Africa and Latin America will continue to drive revenues for the company. Furthermore, JDS Uniphase plans to take part in 100G adoption in China, which we believe will open more avenues for the company.

However, on the downside, the ongoing global economic fluctuations may significantly affect the prospects of JDS Uniphase. Moreover, the consolidation trend of wireless networks and data centers will worsen the situation.

The overall book-to-bill ratio of the company in the reported quarter was below 1, mainly affected by reduced orders from the North American region. Furthermore, in the last one year, the stock price of JDS Uniphase soared 42% and is presently trading at the high-end of 52-week high.

JDS Uniphase currently has a Zacks Rank #4 (Sell).

Other Stocks to Consider

Other stocks that belongs to the sector include ClearOne, Inc. (CLRO - Snapshot Report), Envivio, Inc. (ENVI) and TESSCO Technologies Inc. (TESS - Snapshot Report). Currently, all three have a Zacks Rank #2 (Buy).

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