JDS Uniphase

(JDSU)

has

risen more than 60% since I recommended it a couple months ago.

Now, with the stock above $10, it makes sense to take some of those profits off the table.

Let me be clear. I still like JDS Uniphase. I still believe that the company is adequately capitalized and that the longer-term outlook for fiber optics components is strong. It's just that I think the stock has made its big move, and that a better entry point can probably be had down the line.

Of course, that's not all. Here's what else worries me:

  • Sales of optical systems continue to decline sharply.
  • Management's revenue forecasts for the March quarter keep coming down. Obviously, near-term revenue and earnings visibility are still poor.
  • Phone carriers' purchases of fiber-related products will continue to be lackluster for at least the next several quarters.

Rockin'
JDS rising since September

Put simply, there is no catalyst for another rally soon, so the stock is likely to drift downward in the coming weeks. How low can it go? Folks, unless management can pull a rabbit out of its hat, or some other unforeseen catalyst emerges, I think that the stock sees $8 or $9 before it sees $12.

Musings

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In keeping with TSC's editorial policy, Glenn Curtis doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Curtis welcomes your feedback.