Ready to blow Optical stocks are on fire. That's wise advice, given the sector's explosive rise and stratospheric valuations. Corvis, which invented a switch that helps telecom carriers direct data over fiber-optic networks, hasn't recorded a single dollar of revenue. Corvis is just the latest symptom of the craze for optical stocks. Shares in optical-parts maker JDS Uniphase have quintupled in the past year.
Some formidable investors scoff at the comparison.
No wonder all the big boys are jockeying for position in this burgeoning business. JDS Uniphase, which sells components for optical systems made by Nortel and others, is also expanding aggressively. Well, there's no question that a lot of these firms are growing breathtakingly fast. Still, I think these stocks have gotten way ahead of themselves and that valuations have become dangerously inflated. JDS now trades at 210 times this year's projected earnings.