Combined with the weakness in Cree a drop to the $25 support from last fall looks very doable.
The logical next victim may be Veeco.
Here's Notable Calls:
Canaccord Genuity is downgrading MOCVD leader Aixtron (NASDAQ:AIXG) to Sell from Hold with a $25 price target (prev. 37.50) given an increased risk profile based on changing customer patterns, a pending cyclical downturn and relatively rich valuation.
The details:
Investment highlights
• As we revisit our Third Cycle assumptions, we conclude that even with significant support from China, the MOCVD market is on the verge of a cyclical downturn and 2010/2011 will represent a historical peak in equipment sales.
• Aixtron has changed its bookings policy, leaving it up to management’s discretion from a conservative criteria, including deposits, documentation and delivery date. While the company believes this is a normal event in a maturing market, we simply note it has increased the risk profile....MORE
Notablecalls: To put this in context, please go back and read the April 5 Cree (CREE) downgrade from Morgan Stanley. CREE uses MOCVD reactors from Aixtron. So do many of its competitors.
What has been happening is that LED volumes have been going up but ASP's have been going down. When margins head south, companies will have less incentive to invest in equipment. The equipment side so far has been a duopoly (Veeco & Aixtron) so MOCVD ASP's have been holding up well. It's the volumes that are likely to suffer.
For some reason AIXG has always traded at a way (sometimes 2x) higher valuation than VECO. I suspect that this spread may decrease today.
The $25 PT is the Street low target for AIXG and I suspect will create selling pressure in the name in the n-t. I also suspect most people didn't know about AIXG's revised booking policy.
The stock took almost a 2 pt hit intraday back in Jan when Citigroup initiated it with a Sell & $30 PT, so it's prone to make big moves.
I would not be surprised to see AIXG break $39 level in the very n-t
