Sterne Agee analyst Andrew Huang this morning launched coverage of Rubicon Technology (RBCN) with a Sell rating and a $10 price target – less than half of yesterday’s close at $20.41. Huang writes in a research note that the bearish stance reflects his view that gross margins will come under pressure in 2011 as “significant capacity comes online.”
Rubicon providers sapphires and other crystalline products for producing LEDs.
Huant says sapphire ingot capacity will increase by 100% next year, while the installed base of MOCVD tools for producing LEDs will increase 80%, and demand for LED chips is expected to rise 70%. “Further driving the potential for oversupply is the onslaught of new entrants to the market, which should contribute to supply in the back half of 2011,” he writes.
RBCN is down $1.04, or 5.1%, to $19.50.
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