Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Garmin Ltd. (GRMN), Verisign, Inc. (VRSN): Two Tech Stocks to Buy and One to Avoid as Target Prices Are Lowered

Garmin Ltd.Editor’s Note: This article originally mentioned Verisign is only spending $5 million in marketing in 2013. That was incorrect and has been removed. Motley Fool apologizes for the error.

The consensus analyst decrease in price targets for a number of technology stocks is being ignored by investors. Despite a downward revision in the target price, shares of Garmin Ltd. (NASDAQ:GRMN), Verisign, Inc. (NASDAQ:VRSN), and JDS Uniphase Corp (NASDAQ:JDSU) are all up from an intermediary low reached at the beginning of May, 2013.

Company % Change in Target # Analysts Current Target Prev. Week Target Rating
GARMIN LTD -9.04 5 $38.75 $42.60 3.231
VERISIGN INC -3.62 5 $45.42 $47.13 3.375
JDS UNIPHASE -3.23 9 $16.25 $16.79 4.111

Data Source: Bloomberg

JDSU data by YCharts

Is a Lowered Target Price Justified?

Analysts may be reacting to the lowered outlook provided by JDS Uniphase Corp (NASDAQ:JDSU) on May 1. The weakening sentiment is in-line with the performance of its competitors. Juniper Networks reported quarterly earnings that missed on revenue and was light on guidance. AT&T reduced its capex budget for the next two years (2014 – 2015), and the company expects the current quarter to come in below the revenue consensus of $448.4 million. JDS Uniphase Corp (NASDAQ:JDSU) expects sales to be about $420-$440 million.

In the March quarter, carrier customers delayed their capital expenditures, which hurt sales for communications test, measurement and optical communications equipment. GAAP earnings were mostly flat over the previous year, and sharply lower from the previous quarter:

Q3 Q2 Q3 Percentage Change
FY 2013 FY 2013 FY 2012 Q-T-Q Y-T-Y
Revenue $ 405.3 $ 429.4 $ 403.3 -5.6 0.5
38.3 44 41.6 -5.7 -3.3
-5.3 3.5 -1.6 -8.8 -3.7

Source: JDSU Press Release

With 235.15 million shares outstanding and $638.8 million in cash and investments, JDS Uniphase Corp (NASDAQ:JDSU) has $2.72 in cash per share. Investors should note that other non-recurring charges totaled $12.9 million in the quarter, which contributed to half of the losses in the quarter.

In the software space, Verisign, Inc. (NASDAQ:VRSN) is just 2.6% below its 52-week high. The company reported revenue of $236 million, and earnings of $0.58 per share, both beating consensus. The average target price for Verisign, Inc. (NASDAQ:VRSN) is $45.42, but shares traded recently at nearly $49.

During its conference call the company said that $844 million remains in its share repurchase program. 3 million shares were purchased by the end of the first quarter. Verisign, Inc. (NASDAQ:VRSN) has a healthy renewal rate (73.3%), though it is slightly below that of last year. Operating margins are healthy; the company guided non-GAAP operating margin to be at least 57%. This would also justify the current valuation of Verisign, Inc. (NASDAQ:VRSN), which trades at a forward P/E of 19.38.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
This is a FREE report from Insider Monkey. Credit Card is NOT required.