Veeco Instruments Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Veeco Instruments (Nasdaq: VECO  ) closed down more than 11% after analysts expressed concerns over pricing and overcapacity in the LED marketplace. Industry peer Cree (Nasdaq: CREE  ) also fell more than 10%.

So what: Five analysts expressed concerns about LED demand. Canaccord Genuity downgraded Veeco to "sell" from "hold" while Deutsche Bank cut its estimates, Forbes reports.

Now what: Of the five, only one firm -- Sterne Agee -- said it continues to recommend clients buy shares. Too harsh? I think so. On a forward-looking basis, the stock trades for less than half the long-term profit growth rate analysts expect. Where do you stand? Would you buy shares of Veeco Instruments at current prices? Please weigh in using the comments box below.

Interested in more info on Veeco Instruments? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 18, 2011, at 8:55 AM, Token2Extreme wrote:

    Why not be buying? VECO by the numbers: recent price $24.61; EPS TTM $8.24; PE 3; P/S 0.92; P/B 1.3; PM 32%; Cash/S =$14; EntityVal/Rev = 0.52; ROE 39%; ROA 22%; Current ratio 3.55; EntityVal/FCF 22.2. assuming EPS TTM falls 70% to $2.47, Graham Value still looks to be about $33.89. China will still be pushing LEDs, even if the USA falls off the wagon.

  • Report this Comment On October 18, 2011, at 10:00 AM, IBJAMMIN wrote:

    This analyst BS is just an attempt to get out of there shorts at better prices. The short squeeze we saw recently was too fast for many of them. For retail investors, it’s another chance to buy on the cheap. If you don’t believe LED lighting will replace incandescent, and eventually compact fluorescent lighting, you would probably have been holding on to your buggy whip and horse collar company stocks if you were around in 1905.

    Don’t try to stand in the way of progress just because those who have big money invested in old technology equipment want to keep squeezing more money out of it. Just like cars replaced horses and diesel replaced steam power, LED’s will be the lighting of the future. Buy the companies that make the equipment that takes the world into that future.

    If you don’t believe it, did you imagine in 1989 that in 10 years cell phones would move out of the cars of the well to do, shrink by 80% in size and cost while they exploded in features, ending up in the pockets of elementary school children? Did you think pagers were it? Did you imagine that most TV’s would be less than 4” thick back then? In 2000 did you even imagine that most cell phones would be connected to the internet and have GPS in them in only 8 years while the price dropped to less than a GPS (in 2000)? How about the I-pad and it’s imitators’ explosion into ordinary people’s hands? Did you anticipate that in 2005? By the way all of those devices would not be possible without LED’s. If an LED glut really develops then their adoption rate will only accelerate. Selling twice as many of anything at a 60% discount means you will make even more money. The More LED’s made, the greater the economies of scale lower prices but maintain margins. There is a snowball effect.

    Currently, LED’s account for only a tiny fraction of general lighting. The increased supply that the analysts fear will accelerate the influx of Led’s into that massive market. In 2001, I predicted the adoption of LED’s for all battery powered and/or mobile devices including cars and trucks in 5 to 8 years. That proved to be true. Now almost everyone is aware of the benefits that LED’s offer. People are just waiting for prices to come down more. A “glut would do just that. OLED’s will follow soon after that.

    Buy VECO, AIXG, CREE, PANL, EMAG, RBCN while they are on sale. Actually you missed the best move in PANL last month, but there is still more to come. I own all of the above, but in amounts small enough that most investors would laugh about it.

  • Report this Comment On October 18, 2011, at 3:06 PM, PureAlpha wrote:

    IBJAMMIN – Everyone knew the automobile would replace the horse and buggy. That was obvious. What was less obvious was how to make money in the automobile revolution. In fact, very few investors made money. There were literally hundreds of US automobile manufacturers in the early 1900s. Today, there are only three. Unfortunately, a lot of investors like you who recognized the obvious lost their money because they failed to recognize the economics of the business. Yes, LED lighting will replace incandescent and fluorescent bulbs. That is a given. However, just like the early automobile industry, LED prices will have to fall drastically before the product is adopted by the masses, which makes LED lighting companies terrible investments.

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