Research Hints of Trouble Mounting in LED Shares (VECO, AIXG, CREE, LEDS)

Veeco Instruments Inc. (NASDAQ: VECO) and Aixtron AG (NASDAQ: AIXG) are feeling some pain from research downgrades this morning, with Veeco feeling the brunt of it.  We are also seeing a large reaction in Cree, Inc. (NASDAQ: CREE) even though it was not the focus of the research.

Citigroup downgraded Veeco to Hold from Buy and the new target is $50.00.  Citi sees China as the concern over possible subsidies ending in China that have allowed LED companies to sell more to Chinese producers.  The good news is that the outcome is not known on China’s intent, but the bad news is that shares are taking it on the chin anyway.

Kaufman Brothers cut Aixtron to Hold from Buy and the new target is $37.00.  That call was more on valuation than on China subsidy fears.  Aixtron trades close to $37.00 per ADR after a 1% drop on this downgrade and its 52-week trading range is $22.42 to $38.96.

Veeco was at $49.97 before today’s downgrade and shares are down at $45.90 after a drop of more than eight percent.  The 52-week range is $29.21 to $54.50 and the shares were up more than 30% in just the last three-month period.

Cree, Inc. (NASDAQ: CREE) is another LED stock we have featured recently as having fallen from grace only to find salvation.  Its shares are down 3.8% at $67.84 on the day and it was not really the focus of these analyst calls.

The move has also brought selling in an overseas LED stock called SemiLEDS Corporation (NASDAQ: LEDS), which just came public last week.

Drops like this often create volatility when the reaction is so strong.  Opportunities for traders…

JON C. OGG