'Dim Skies Still Persist' For Veeco Instruments; Summit Research Maintains Sell

Summit Research’s Srini Sundararajan maintained a Sell rating on Veeco Instruments Inc. (NASDAQ: VECO), with a price target of $12.

Soft MOCVD

Sundararajan mentioned that during its previous earnings call, the company had indicated that it expected the MOCVD investments to remain soft in 1H2016.

However, the analyst also pointed out, “The environment for LED lighting is OK however the display backlighting business remains challenging.”

Sundararajan explained that although the demand for LED lighting has continued to grow, TV demand had been weak, leading to weak demand for TV backlighting LED.

Related Link: Veeco Shares Downgraded To Sell At Summit Research

LED Demand

As a results, LED oversupply has persisted and therefore there had been lower demand for MOCVD tools.

According to the Summit Research report, “While better tidings during the second half of the year is the wish of everyone, it does not seem to have happened during the last three years. However, hope springs eternal.”

The analyst also pointed out that both LED chipmakers and packagers have witnessed an about 20 percent decline in revenues in February, which was marginally worse than expected even for a seasonally soft month.

Sundararajan added that “at least according to Taiwan chipmakers and packagers’ revenues, 2016 is not getting any better than 2015. Hence we think, using Taiwan data as a barometer, that MOCVD makers which sell to these chipmakers are less likely to have incremental sales.”