Veco's products are still the best in thin film deposition industry. Veeco Ion sources are the best, and you can find them in most thin film deposition systems. This stock should be traded in the 30's.
Sentiment: Strong Buy
Not sure how I got a thumbs down, someone was greedy. I traded this puppy nicely yesterday and hope to do the same today.
I believe (I'm buying on these beliefs, too) someone is taking it lower as they did after last earning reports, only to go back to it's 19-20 range. Time will tell, last earning report, so thing happened. The future looks bright for Veeco, before you talk about their cash on hand. However, the boys are helping themselves to the cookies!
Reports Q1 (Mar) loss of $0.15 per share, excluding non-recurring items, $0.14 better than the Capital IQ Consensus of ($0.29); revenues fell 20.7% year/year to $78 mln vs the $76.17 mln .
Gap up to $19's tomorrow.
Sentiment: Strong Buy
I've been following trade alerts from the Penny Stock 101 org newsletter, and I've been consistanly beating the market. If you want to get an early jump on the fastest moving NASDAQ, NYES and OTC stocks signup now.Just on an email stating they have a new pick coming tomorrow!
Veeco Instruments: Yes, Still Patient
Feb. 28, 2016 4:00 PM ET|
2 comments |
About: Veeco Instruments Inc. (VECO)
Long/short equity, value, gambling
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VECO posted another disappointing quarter in Q4, with a long-awaited recovery in MOCVD sales pushed back once again.
Still, the market shouldn't have been terribly surprised, and the quarter itself wasn't that bad.
The rest of the business had an excellent Q4, and Veeco's dominance of rival Aixtron continues to expand.
I still believe the long-term case here isn't broken - as frustrating as recent trading has been - and I'm staying long.
I understand why the market sold off shares of Veeco Instruments (NASDAQ:VECO) on Tuesday, after the company reported disappointing (to say the least) fourth quarter results. The Q4 numbers themselves weren't awful, which is good news for Veeco, a company dealing with overcapacity from end customers, a weak LED backlighting market, and credit problems in China. VECO was profitable on a non-GAAP basis - albeit minimally so, with EPS of $0.01 - bookings doubled from Q3, and the results beat analyst estimates on both the top and bottom lines.
The problem was Q1 guidance, which wildly missed expectations: Veeco projects revenue of just $70-80 million and a non-GAAP loss of $0.25-$0.35, against consensus of ~$100 million and breakeven EPS. Demand for the MOCVD units that still drive the majority of Veeco's business remains soft, and the company again is pushing out a rebound until the second half. And the market simply appears out of patience, with one analyst pointing out that this is the fourth straight year in which a rebound has failed to materialize.
As a VECO shareholder whose position is underwater despite some dollar-cost averaging following a disappointing Q3, and who recommended the stock above $33 in March, I understand the frustration. But I also understand why the stock has been filling the gap over the past few sessions:
Source: Seeking Alpha
Yes, the Q1 figures are frustrating; but who's surprised?
The MOCVD Business
From a long-term perspective, Veeco's MOCVD business, which produces the machines used in turn to produce LED chips (primarily), theoretically is tied to end unit demand for LED chips. At the moment, the correlation isn't quite so simple. Veeco still is dealing with overcapacity built in 2010-2011, when the company earned over $10 per share combined, thanks to Chinese subsidies that created many, many more LED manufacturers than the market needed, and thus artificially inflated demand for Veeco's MOCVD products.
Meanwhile, demand for LED backlighting chips for televisions has been weak, and that isn't just a problem for Veeco: shares of Corning (NYSE:GLW) began to fall in May, and a chart comparison of the two very different but similarly exposed stocks shows a significant correlation:
GLW data by YCharts
Meanwhile, Chinese producers are having difficulty getting credit - per the Q4 conference call, the "vast majority" of MOCVD orders were to the US and Europe in the quarter, despite the majority share of LED production being in China and Taiwan. Pricing pressure and an oversupplied market have led to cautiousness from LED makers - see Cree's (NASDAQ:CREE) Q2 call for an example - and utilization still hasn't reached the 90% level where the replacement cycle starts.
This has been the story for a while, though Veeco, on occasion has looked like it was finally turning the corner in MOCVD. That, indeed, was the case in March when I first recommended the stock. Chinese utilization appeared to finally have rebounded:
Veeco management was optimistic on the Q4 2014 conference call, projecting ~30% revenue growth for the full year and seeing the long-awaited stabilization finally on the way in 2015. Clearly, management - and many investors - were ahead of the story. And, again, the market's impatience is understandable: Veeco's MOCVD business is starting to look like a "next year, every year" type of story.
But what I'm a bit surprised by relative to Q4 is why investors and analysts expected much from Q1 revenue. Veeco's Q3 was another disaster, with bookings of just $52 million. Given revenue recognition generally takes 4-6 months - and can be stretched in the current climate, given tighter credit and longer time to acceptance - those Q3 '15 bookings augured a difficult Q1 from a revenue perspective. Indeed, while I averaged down after that report, I also wrote after the quarter that "the cautious optimism that began last year thus has been wiped out."
That's still the case, and the question remains: is the MOCVD opportunity being delayed by weak TV demand and Chinese credit issues, or has something fundamentally changed relative to the long-term nature of that opportunity? And I still believe the answer is the former. Aixtron SE (NASDAQ:AIXG), Veeco's only real competitor in the space, continues to flounder: it was not able to qualify an order of 50 tools to major LED manufacturer San'an Microelectronics and its new tools simply can't compete with those of Veeco. Veeco has built its market share from an estimated 24% less than a decade ago, per a December presentation to roughly 75% at this point, per the Q4 call. Veeco's next generation EPIK system is outselling Aixtron 8 to 1, and Aixtron's problems with San'an don't imply that ratio changing much (at least in Aixtron's favor).
All told, the long-term story here still seems intact. MOCVD installations will be driven by LED unit demand, which should continue to grow. (Note, for example, GE's (NYSE:GE) recent decision to cease producing CFL bulbs in favor of LED products.) And Veeco's dominance is moving it toward a near-monopoly status in the market, whose technical requirements, current weakness and relatively small overall TAM likely dissuade any additional competition from entering. The market's impatience is understandable, and any basic DCF model would imply an impact to valuation from future MOCVD profits being pushed out. But the MOCVD business seems certain to turn profitable at some point.
And that point may not be as far out as the most dire estimates might suggest, at the risk of being overoptimistic yet again. Utilization is in the mid-80% range, not far from where tool demand generally begins to increase, and older models are becoming uneconomical, given declining prices in the LED space. CEO John Peeler estimated about 15% of worldwide capacity was no longer "commercially viable," a figure that will rise going forward. There's hope for Veeco to capture Sa'nan's now-failed order with Aixtron. And Q4 bookings weren't terrible - at $107 million; they were up 50% Q/Q - which means Q2 should have a decent base. There's still near- and mid-term risk here, but the long-term MOCVD opportunity for Veeco isn't broken just yet.
The Rest Of The Business
Meanwhile, newer products and applications that Veeco has targeted to augment the highly lumpy MOCVD business are performing well - and, in fact, had a great Q4. RF orders for Veeco PSP (precision surface processing) quadrupled sequentially, thanks to increasing smartphone demand. The PSP business as a whole grew over 20% year-over-year, per the Q4 call, against a 10% target, with Q4 bookings a record. Fan-out wafer level packaging - projected to grow ~60% annually - offers an opportunity for PSP and wet etch systems going forward. To be sure, Veeco itself sees only a ~$200 million market for advanced packaging at the moment, but given $477 million in 2015 sales overall and newer applications down the line, there is some room for incremental growth beyond MOCVD.
In 2013, Veeco bought Synos Technology to enter the flexible OLED business, an acquisition that has been an unmitigated disaster, with Veeco writing off the majority of the purchase in December 2014. But Veeco still has hopes of generating some value from the business's FAST-ALD technology, and is working with memory device manufacturers to see if there is some value to be salvaged from the deal. Those efforts include additional spending, and there is (an admittedly modest) 'win/win' outcome (as one analyst put it) left: either FAST-ALD can become a viable revenue generator (likely through a partnership with an existing manufacturer) or Veeco can cut the costs. Peeler said on the Q4 call that additional opex cuts would be on the table if revenue doesn't return, providing a bit of flexibility going forward.
Again, this isn't an ideal situation, and I do understand the frustration with Veeco's trajectory over the past few years. But I don't think Q4 changes the story here, and I still think VECO shares are undervalued in the long term. (How long that term is remains to be seen at this point.)
On a non-GAAP basis, Veeco earned $0.54 in 2015; backing out nearly $10 in cash, that puts VECO's trailing multiple at a reasonable 15.4x. That said, some of the cash (~30%) is held overseas, and non-GAAP net income of just over $22 million excludes share-based compensation of $18 million.
But these are near-trough earnings (Veeco posted even a non-GAAP loss in both 2013 and 2014), and there is a lot of operating leverage in Veeco's model. The company may never again see the $5 per share it earned in 2011 (on revenue more than double that seen in 2015), but even getting ~25% growth to the $600 million level likely would drive EPS well past $1 per share. With an enterprise value of ~$8 per share at the moment, even that figure would imply upside.
It still seems that it is a matter of when, not if, that type of sales growth will come, and how discounted those profits will be. But I still see a reasonable case for current value over $20, and the potential to huge profits when a rebound does come. Deriving an exact figure for fair value suffers from the "garbage in, garbage out" problem, highlighted by analyst estimates, which for FY17 EPS range from $0.06 to $3.01.
But there's likely a mid-teens floor on the stock, given its dominant MOCVD market share and a cash balance of ~$9 per share even accounting for repatriation taxes on overseas cash. And I still think the stock is a solid buy below $20. Current weakness aside, this still is the market leader with growing share and exposure to a market with long-term growth prospects. At some point, I still believe those positive attributes will shine through, even if right now it looks like it might take a long while.
I'm sure the bottom won't be reached for sometime or until their is a complete change in management and the board of directors which this proves they don't know which way is up.If this does not happen their is no bottom in this market were in.This probably won't happen since the board and management are all in bed together.They will be congradulating each other on a job well done,how sick is that.
Did you see the analyst downgrade? "Srini Sundararajan has downgraded the rating on Veeco Instruments Inc. (NASDAQ: VECO) to Sell, while lowering the price target to $12."
What a joke, LOL. VECO has ~$10 in cash. Did he miss that? A $12 price target means that VECO operations (the business) is worth ~$2. They can earn that in a good year. That's a future P/E of 1. LOL. Yeah, it's a ploy to get people out and them in cheap. After the initial drop, there were buyers running it up all day long......
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Yeah, I hope they aren't missing the boat on that (now that I'm a shareholder) ;) In at 15.40. So far so good. I'm convinced that these gaps down are for the institutional buyers to get in cheap.
At current price VEECO is selling below book value and over half their value is in cash. After-hours last night I saw the gap down and figured it was a no-brainer of a buy, and got a good price at the open. My guess is we'll be back over 19 by next quarter. Hope they can execute, particularly selling manufacturing equipment in the OLED space where there is a lot of growth forecasted.
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I thought I was buying at the bottom at 16.25, I hope your 15 doesn't get filled. But, I jumped in ahead of you with a 15.15 buy, sorry. I believe this selling is way over done and we are just talking to ourselves about 15, we'll see. GL
Yeah, it sure looks that way to me. I mean, if the company were highly profitable they might have some justification in paying themselves hefty bonuses. But this compensation is enough to turn the company from marginally profitable to quite unprofitable.
What a bunch of dummies running this joke of a company if you can even call this a company.All they are interested in is how much money they can milk this company for.Until the ceo is fired along with his buddys nothing will change,believe that.