Veeco Instruments SELL

VECO : NASDAQ : US$30.59
SELL 
Target: US$22.00

COMPANY DESCRIPTION:
Veeco Instruments manufactures process equipment and instrumentation for the LED, solar, data storage, wireless,
semiconductor and scientific research markets. Veeco’s manufacturing and engineering facilities are located in New York, New Jersey, California, Colorado, Arizona and Minnesota, and sales offices are found globally.

Investment highlights
 Our current rating is in-line with our bearish view that there is limited upside for both MOCVD equipment names.
 Now that the company is current we have seen the expected negative effect on Veeco’s margins due to price competition and lack of a bubble-type spending environment which we do not believe will be repeated. We do not envision that pricing will materially recover over the next investment cycle, continuing to weigh on margins.
 While we are bullish on the SSL secular trend, we believe expectations for both Veeco and AIXTRON are not in-line
with the new normal of a 200-400 annual tool market.
 We see some potential upside from Synos; however, this technology is still nascent and we harbor concerns about the increase in OPEX to support this and other new initiatives.
 We believe that fundamental downside exists in VECO shares, despite investor enthusiasm on the secular trend.
Given the risks of a slower MOCVD cycle and limited earnings power we would advise investors put money downstream for exposure to the LED macro.

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