Morgan Stanley Rolls Back JDS Estimates

Analyst David Jackson is concerned about declining prices of optical components and pricing pressure on thin-film-filter-based products

Morgan Stanley cut the estimate and target price on JDS Uniphase (JDSU ) but maintained its outperform rating.

Analyst David Jackson says he cut the $0.65 fiscal 2001 (June) EPS estimate to $0.62, and lowered the $0.64 fiscal 2002 estimate to $0.60. He also reduced the calendar Q1 gross margin estimate by 250 points to 45.5%. He thinks prices of passive optical components will continue to decline, and notes that industry contacts say pricing pressure on thin-film-filter-based products has worsened.

However, Jackson would buy JDS at current levels. He says his DCF analysis implies fair value of $30, and the relative price-earnings-to-growth analysis implies the price is significantly higher. Therefore, Jackson lowered the $50 target to $30.

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