Earnings And Catalysts Will Boost This Cheap Networking Stock

Aug.15.12 | About: Viavi Solutions (VIAV)

JDS Uniphase (JDSU) had one of its best days in quite a while today. Not only did it provide a solid earnings report that beat estimates, but it also had some other catalysts. These cheap shares appear to have some additional upside ahead.

Here are the key highlights/catalysts for JDSU:

  • The company reported earnings per share of 15 cents a share, an impressive 3 cents a share above consensus.
  • More importantly, given the amount of revenue misses by tech companies this quarter, JDSU reported revenues of $439 million. This was a solid $16 million above estimates.
  • AT&T (NYSE:T), one of the company's primary customers, confirmed its capital budget plan, which is a positive for JDSU.
  • Cisco (NASDAQ:CSCO) reported earnings after the bell that beat on both the top and the bottom lines. It also raised its dividend. Evidently the networking space is not as dismal as the Street was expecting.

According to the business description from Yahoo Finance, "JDS Uniphase Corporation provides communications test and measurement solutions, and optical products for telecommunications service providers, wireless operators, cable."

Here are four additional reasons to pick up JDSU at $11.50 a share:

  1. The company has almost $400 million in net cash on its books (over 15% of market capitalization).
  2. The stock is selling at just over 11 times forward earnings, a deep discount to its five-year average (24.6).
  3. The median price target of the 11 analysts who cover the stock is $14 a share. I would look for several analysts to raise their price targets based on these earnings and catalysts.
  4. JDSU just broke out of its technical range and crossed over its 100-day moving average (see chart below).

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Disclosure: I am long CSCO, JDSU.