JDS Uniphase (JDSU) provides communications test and measurement solutions, and optical products for telecommunications service providers, wireless operators, cable operators, network-equipment manufacturers, and enterprises worldwide. It may be the fault of the poor macro economy we are facing but its clients are just hesitant to spend money right now and it is affecting the stock. The low cost of the stock is providing a number of short term income plays.
Long term investing in this stock at some point would be a good idea. The stock recently dropped from a double top 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.
Listening to analysts, we can get a picture of what may be happening with the stock. Stifel Nicolaus analysts believe the company is going to have continued struggles with sales because businesses are just very cautious to spend more than they need to right now. Revenue projections are well below past projections. The company's guidance fell short because of an ever present tight Telco spending environment. Telco spending is expected to resume growing in 2H12. This gives us our first indication of when the stock might steadily grow again.
Shares of JDSU 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, might it be best to wait until the end of the year? But this give us a good options play to consider also. We can provide plenty of time decay protection also.
The Options Play
- Buy a December 2012 call option with a strike of $11 (priced at $1.44)
- Sell a December 2012 call option with a strike of $12 (priced at $1.02)
- Net Debit to Start: $0.42
- Maximum Profit: $0.58
Reasoning behind the Trade
- We believe the stock will move up, but not until the second half of the year.
- It should move up and break through these prices before the year's end.