Everyone Has an Opinion, But Does Anyone Care? (JDSU)

Nothing slaps equities buyers in the face like a cold, wet towel more than the word “investigation”. Over the weekend, Faruqi and Faruqi announced it was launching an investigation into JDS Uniphase (NASDAQ: JDSU) for possible breaches of fiduciary duties. The inquiry stems from a proxy statement JDS Uniphase filed with the Securities and Exchange Commission last week on October 2. Specifically, the Board of Directors made a recommendation to shareholders for the approval of an amendment to the company’s compensation program, which in effect would increase the number of shares by 10 million. The action, if approved, would have a dilutive effect on the company stock. Faruqi and Faruqi is a national law firm that represents investors in class action litigation. JDS Uniphase has yet to comment on the investigation.

Traders received another hit with a cold slap today when Needham and Company issued a research report reiterating its “hold” rating on the stock. The report from Needham follows positive recommendations last week by RBS Capital and Raymond James that gave the stock an “outperform” rating.  RBS Capital has a price target of $16.00, while Raymond James showed a little more caution with a $13.50 projected price per share. None of this seems to have stirred excitement in buyers as the stock continues to slide from a mid-September peak of $13.49. In the last three weeks, share prices have declined by approximately 19%.

It was hard to tell what traders found more troubling this morning: the investigation, the possibility of 10 million additional shares or the “hold” rating from a research analyst. Regardless, sellers queued up before the start of trading. When the opening bell rang, the stock began the day gapping down 20 cents from Friday’s closing price of $11.36. A brief rally after the opening sent the stock to an intraday high of $11.20. Within 90 minutes of the opening, the stock touched its low for the day when traders exchanged shares for $10.83. The afternoon saw the stock settle down a bit. Shares of JDS Uniphase ended the day down over 4% to finish down 48 cents at $10.88. Traders exchanged over 6 million shares of the stock during the holiday session compared to the 5.2 million shares observed on an average day. Considering the recent history of the stock, traders may wonder if today’s action signals more downward pressure in the weeks to come.

Over the last 12 months, the stock has traded as high as $15.17 set in February. The next five months saw share prices drop 44% to a low of $8.47 in July. The stock appeared to be on the mend, gaining almost 55% from its annual low to the peak in September. The move could be partially attributed to an earnings report in the middle of August that beat the expectations of analysts.  The company showed a 10-cent loss per share for the fourth quarter, which bested expectations by 2 cents.

The consensus view of the 16 analysts covering JDS Uniphase rates the stock with an “overweight” recommendation with an average price target of $14.57

In other news, the company announced on August 14 that it had completed the acquisition of GenComm, a South Korea-based company that provides wireless test and measurement solutions.

JDS Uniphase is a provider of testing and measurement products for telecommunications providers, wireless operators, cable operators and network equipment makers.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).