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Fiber Optics Sector

Stocks followed:

company ticker symbol
Ciena CIEN
Corning GLW
Corvis CORV

JDS Uniphase


Juniper Networks

Nortel NT
Sycamore SCMR

updated 3/26/01

Sector Rating

6 month outlook: 4/10
1 year outlook: 6/10

The tech sector has literally collapsed since the last update on 11/20/2000. Although we were correct in telling investors to avoid the more highly valued fiber optics stocks (Sycamore, Juniper and Ciena), it turned out that all fiber optics stocks plummetted. The tech sector remains a volatile area for investors. As I type this, Cisco is at a new multi-year low at 17-18 (which doesn't bode well for the stock in the short term).

When should investors step in to buy these shares? That is the million dollar question. We still believe in Nortel, whose share price has descended to 1998 levels (before the fiber optics craze). Lucent is a potential turnaround candidate, albeit a risky one this early in the game. As we said last time, if you plan on holding shares at least 12-24 months, you can buy now in stages to average out your costs. If you're holding for the short term, we would avoid the sector (the same recommendation we gave back in November). As we indicated before, we do not expect the economy to recover for at least 3 quarters. The market has finally priced into consideration that this slowdown will last longer than the previously anticipated 2 quarters.

We continue to urge investors to stay away from the more riksy and highly valued fiber optics companies: Corvis, Sycamore, Juniper and Ciena. Sycamore has already been shaved to a tiny bit of its former self. Trading at 11, the stocks is down from its 52 week high of 172 1/2. With a P/E in the 70's, it still is an expensive stock by fundamental measures. Juniper and Ciena are still valued at P/E of about 130. Any missteps by these two companies, and you can expect shares to plummet even more.

We lower the 6 month outlook of the fiber optics sector from 5/10 to 4/10 while maintaining the 6/10 outlook 12 months out.




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The Financial Ad Trader