Summit Research Upgrades Veeco Instruments, Cites Aixtron Sanan Order Cut

• Shares of Veeco Instruments Inc. VECO have appreciated 7.76 percent over the past one month, from a low of $18.28 on November 13.
• Srini Sundararajan of Summit Research has upgraded the rating on the company to Hold, with a price target of $24.
• Sundararajan believes that the loss of the Sanan order from AIXTRON SE (ADR) AIXG is a “big positive” for Veeco Instruments.

Analyst Srini Sundararajan explained that the loss of the order came despite Veeco Instruments’ shipments to San’an having proceeded without any delays.

Aixtron has announced on December 9 that it had reached an agreement with San’an Optoelectronics regarding a significant reduction in AIX R6 MOCVD systems being ordered, from 50 to 3.

“It might indicate that AIXG’s R6 is not as suitable for San’an’s applications or it may indicate that the tool needs to make additional modifications,” Sundararajan said, adding that it also suggests the Veeco Instruments was doing marginally better than Aixtron, while EPIK was performing better than R6.

According to the Summit Research report, “VECO is itself also suffering from problems related to the fact that most of its backlog is from China. In addition, at a recent competitor conference, VECO’s CFO mentioned that for C4Q15, VECO is likely to see revenues below the midpoint of guidance or around $100M.”