Veeco Shares Downgraded To Sell At Summit Research

Summit Research's Srini Sundararajan has downgraded the rating on Veeco Instruments Inc. VECO to Sell, while lowering the price target to $12.

Sundararajan mentioned that the company reported "underwhelming" C4Q results, while the C1Q guidance was "dismal."

Veeco Instruments guided to soft Metal Organic Chemical Vapor Deposition (MOCVD) investments in 1H16.

"The environment for LED lighting is OK however the display backlighting business remains challenging," the Summit Research report said.

This means that although the demand for LED lighting continues to grow, TV demand has been weak, and therefore the demand for TV backlighting LED has been weak.

"Therefore, an LED oversupply persists and hence MOCVD tools are less in demand," Sundararajan explained.

The analyst stated that this was possibly the fourth consecutive year during which the market expectations had been for seasonally higher utilization and an uptick in LED demand in 2H. However, this did not occur and 2016 was unlikely to be any different.

On the other hand, "VECO's proliferation of Epik-s continues unabated which is likely to result in increased market share in MOCVD," while automobiles and mobile devices have been "incorporating more and more RF and MEMS sensor content."

This has been leading to incremental opportunities for the company's products, especially PSP related.