Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.
|Company||Aixtron (Nasdaq: AIXG )|
|Stock Price At Underperform Recommendation:||$28.68|
|Market Cap||$2.88 billion|
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Applied Materials (Nasdaq: AMAT )
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Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.
This Week's Pitch:
This is a great company since they along with [Veeco Instruments (Nasdaq: VECO ) ] are the main suppliers for LED equipment production. However, they are going to face headwinds that will most certain affect earnings going forward.
First of all, China's market is becoming more saturated with equipment due to the surge in orders because of fears of local government subsidies for the led equipment.
Second, China is trying to steer investment dollars toward domestic offerings so that their hard earned money doesn't go to either German or American companies. This will most certainly be a major negative as well going forward.
Third, even if the first 2 factors don't pan out, then you have to consider valuations. Fellow [Veeco] is way cheaper with a rock solid balance sheet and yet has for some reason not advanced as rapidly as [Aixtron]. I think given the prospects, [Veeco] is a better deal in an overall crummy investment environment. Especially when you consider that [Aixtron]is trading at a 2x premium to [Veeco].