- UBS' Amitabh Passi has launched coverage on the former/post-spinoff JDS Uniphase (NASDAQ:VIAV) with Buy rating and $7.50 target two days after it posted FQ4 results, issued FQ1 guidance, and announced CEO Tom Waechter has stepped down.
- Passi: "There are 3 key sources of debate on the name: a) quality of management, b) demand outlook in the test & measurement (T&M) business and c) value ascribed to the $4.5b of net operating losses, or [estimated] ~$1.5b of deferred tax assets (DTA). With the Viavi CEO having just resigned, we believe there is now an increased urgency and willingness by the Board to focus on execution excellence and stabilizing the business."
- He admits the outlook for JDS' network test/measurement equipment ops - they've seen double-digit sales declines - remains "challenged due to a combination of market transitions and execution issues." But Passi also thinks "excess cash, DTAs, as well as the healthy Optical Security Products group (OSP) limit downside." He "conservatively" ascribes a $1.15/share value due to the DTAs, compared with a ~$6/share face value. "Our [sum-of-the-parts] analysis therefore suggests a base case value for Viavi of ~$7.50/share, upside to $12/share and downside to $4.50/share."