Morgan Stanley: JDS Uniphase Split Makes Sense, Shares Worth $15
In a report published Wednesday, Morgan Stanley analysts initiated coverage of JDS Uniphase Corp (NASDAQ: JDSU) with an Equal-weight rating and price target of $15. Given the significant industry headwinds facing the company, the path to profitable growth is likely to be via the proposed split of Lumentum.
"Post-split, Lumentum has potential strategic value, and Viavi could participate in consolidation within the space, but it will take time to prove out the margin improvement story," the analysts said.
The industry headwinds facing JDS Uniphase include challenges to SP spending, intense competition for a shrinking profit pool that affects margins and decline in optical content. The best way for the company to ensure profitable growth in this scenario is to go ahead with the announced spin-off of Lumenten, its optical components business, and consolidate its network & service enablement and optical security business, Viavi.
Although there has been press reports and activist pressure to sell off Lumenten, the company announced that the spin-off takes priority and if there was to be any sale, it would only be after the split.
According to the Morgan Stanley report, "Whether or not Lumentum is sold post-split, our view of the main value driver in JDSU is the ability to grow into target margins on the Viavi business."
Latest Ratings for JDSU
May 2015 | Morgan Stanley | Initiates Coverage on | Equal-weight | |
Mar 2015 | Jefferies | Maintains | Hold | |
Jan 2015 | Barclays | Maintains | Equal-weight |
View More Analyst Ratings for JDSU
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