Oppenheimer's Morning Research (ENDP, RBCN)

Oppenheimer & Co. is out with its morning research report, and it covers Endo Pharmaceuticals ENDP and Rubicon Technology, Inc. RBCN in the report. Regarding Endo, Oppenheimer says, "As of 9/29, we are upgrading shares of ENDP to Outperform from Perform and are establishing a $40 price target. Importantly, (1) on 9/28, ENDP announced the $1.2B acquisition of privately-held generics manufacturer, Qualitest, which we believe to be a potentially transformative acquisition for ENDP. (2) Assuming $350M in 2010 Qualitest sales, this deal was priced at ~3.4x sales, which we view as attractive for ENDP." When discussing Rubicon, Oppenheimer writes, "There's little debating that current sapphire prices and margins are above sustainable long-term levels. The real question is how long the current imbalance between sapphire supply and LED demand persists. Solving for a direct answer is complicated by the opacity of the key demand variable—LED yield—which is systematically obscured and inherently fungible. So we use a proxy and compare sapphire supply to LED manufacturing capacity. This approach suggests that the imminent tripling of sapphire supply merely catches up with the recent growth in LED tools. We estimate tool orders would have to decline ~35% next year for sapphire supply/manufacturing capacity to merely balance in 4Q11. This suggests the strong pricing environment for sapphire will persist for several quarters."