Buy Rubicon Ahead Of Cyclical And Secular Upturn
Valuable Insights • 38 Comments
Valuable Insights • 38 Comments
Tue, Jan. 5, 12:40 PM
Mon, Jan. 4, 3:24 PM
- Interestingly, a day in which major indices are down over 2% has proven kind to many tech and/or momentum names that endured steep losses in 2015. The list includes SunEdison (SUNE +13%), GoPro (GPRO +3.9%), ExOne (XONE +5.6%), Voxeljet (VJET +9.8%), Rubicon (RBCN +29%), Identiv (INVE +15.1%), and QuickLogic (QUIK +12.4%). Previously covered: 3D Systems/Stratasys and FireEye.
- Profit-taking by shorts who (for tax purposes) didn't want to cover in 2015 is likely a factor behind some of the moves. SunEdison had 123.1M shares (48% of its float) shorted as of Dec. 15. GoPro had 32.9M shares (50% of its float) shorted, and ExOne 2.3M shares (24% of its float) shorted.
- SunEdison rallied last week after announcing a $336M debt-for-equity exchange. Rubicon caught a bid after issuing a shareholder letter.
Dec. 29, 2015, 11:31 AM
- In a letter to shareholders, Rubicon (NASDAQ:RBCN) states "a very well capitalized company" is evaluating the use of sapphire for what could be "a third major market" for the material (LEDs and mobile devices being the existing ones). "If they select sapphire, Rubicon is well positioned to become an important part of their supply chain. Meaningful volumes could begin later next year with significant ramp of this application projected in 2017 and beyond."
- Rubicon adds "a major consumer electronics manufacturer" is sampling 6" sapphire wafers for potential use in non-LED chip production, potentially opening up another major market in 2017. And a medical device maker is thinking of using 6" wafers for medical monitoring equipment. "While this would not have the scale of the two markets previously mentioned, if this market materializes, it could generate sufficient demand within the next two to three years to absorb all of Rubicon’s current six-inch capacity."
- Also mentioned: 1) Rubicon has been selected as a lead supplier of large patterned sapphire substrate (PSS) wafers by a major LED chip manufacturer. 2) "Increased sales opportunities" are expected for the optical market, with Rubicon's LANCE project (enables large, thick, sapphire windows) drawing interest from military and industrial firms. 3) Committed 2016 capex is "very limited." 4) Rubicon is limiting sales of lower-margin core and crystal growth products in favor of higher-margin offerings.
- The letter comes at the end of a year that has seen Rubicon post major losses due to weak wafer sales and a brutal pricing environment - in the letter, Rubicon notes pricing for most sapphire products fell 35% in 2015. Shares are still down 73% YTD.
Nov. 10, 2015, 4:33 PM
- For yet another quarter, Rubicon (NASDAQ:RBCN) has guided light: The sapphire wafer/materials maker expects Q4 revenue of just $2M-$3M and GAAP EPS of -$0.30, below a consensus of $7.9M and -$0.24.
- Rubicon expects the sapphire market to be "particularly challenging" in Q4, and plans to limit sales of 2" and 4" wafers to allow time for inventory to clear. In addition, a key patterned sapphire substrate (PSS) customer has delayed the start of a purchase order due to "revised end-customer demand."
- Notably, CEO Bill Weissman states the sapphire market's excess capacity has been "driven by the prospect of sapphire cover glass in mobile devices," and notes sapphire cover glass adoption "has the potential to quickly change the market supply solution." Last year, GT Advanced filed for bankruptcy after a failed attempt to supply sapphire cover glass for iPhones. More recently, GT agreed to auction the majority of the ~2,000 sapphire furnaces it once purchased with Apple's help.
- Weissman: "While we are also taking steps to assure that Rubicon is positioned to participate in the sapphire cover glass market if that application is adopted, we are taking the actions necessary to diversify the business to reduce volatility and drive stronger margins over the long-term while putting intense focus on cost reduction to reduce cash usage in the near-term."
- A $39.6M asset impairment charge was recorded in Q3. Gross margin was -73%, a slight improvement from the year-ago period's -118%. Sales/marketing spend rose by $50K Y/Y to $287K; R&D spend rose by $112K to $558K. Rubicon ended Q3 with $34.1M in cash (down from $36M at the end of Q2), and no debt.
- Shares fell to $1.12 in regular trading. The 52-week low is $1.00.
- Q3 results, PR
Aug. 6, 2015, 7:05 PM
- On top of missing Q3 revenue estimates (while beating on EPS), Rubicon (NASDAQ:RBCN) forecasts Q3 revenue will be "at or below" a Q2 level of $7.1M. Consensus is at $9.2M.
- Along with its results/guidance, Rubicon has announced a "resource sharing agreement" for the company's Penang, Malaysia sapphire substrate plant. Rubicon will get access to an unnamed manufacturer's low-cost 4" polishing process, and in return give the manufacturer access to "a portion of its underutilized slicing and polishing capacity."
- The Q2 sales miss is partly blamed on high TV inventories and LED lighting seasonality, along with the related impact on pricing. Patterned sapphire substrate (PSS) sales were a strong point, nearly doubling Q/Q to $900K. PSS sales are expected to rise further in Q3, and a $9M, 12-month, PSS order will begin to be fulfilled in October, but 2" and 4" core wafer visibility is said to be limited.
- Due to weak demand, Rubicon is "temporarily scaling back some of its raw material and crystal growth operations." Rubicon ended Q2 with $36M in cash/short-term investments, down from $41M at the end of Q1.
- Shares have dropped to $1.64 in AH trading, making new 52-week lows in the process.
- Q2 results, PR
Jul. 20, 2015, 5:39 PM
Jun. 29, 2015, 3:38 PM
- A long list of tech companies are posting big declines as the Nasdaq drops 2.2% amid a market rout triggered by expectations of a pending Greek default.
- 6%+ decliners include program guide/content protection IP firm Rovi (ROVI -9.5%), ultracapacitor maker Maxwell (MXWL -8.2%), wireless charging tech developer Energous (WATT -9%), cybersecurity hardware/software provider KEYW Holding (KEYW -8.5%), LED sapphire wafer maker Rubicon (RBCN -10.8%), IP licensing firm WiLAN (WILN -7.1%), security software provider Wave Systems (WAVX -11.6%), online video hosting platform Brightcove (BCOV -7%).
- In a repeat of Friday's trading, many Chinese tech names are also off sharply. The group includes mobile app developer Cheetah Mobile (CMCM -9.7%), e-commerce services firm Baozun (BZUN -8%), online travel agency eLong (LONG -15.3%), and online retailer LightInTheBox (LITB -7.8%).
- See also: LinkedIn, Yandex/Qiwi, solar stocks, Xoom, AppliedMicro
Jun. 12, 2015, 5:37 PM
May 8, 2015, 2:09 PM
- While Rubicon (NASDAQ:RBCN) beat Q1 estimates, it forecasts Q2 revenue and EPS will be similar to Q1 levels of $8.9M and -$0.32; that suggests they'll be below a consensus of $9.7M and -$0.32.
- Echoing what has been a common refrain in recent quarters, the LED sapphire wafer/materials provider states Q2 results will be hurt by price pressure, particularly for 2" materials; higher volumes and cost cuts will offset.
- It's more optimistic about 2H15: "[W]e have visibility into growing [patterened sapphire substrate] volumes in the second half of the year. With increased wafer revenue in combination with reducing product costs, we expect a meaningful improvement in operating results by the end of the year."
- Financials: Gross margin (-57.4%) was once more negative in Q1. A $600K Y/Y drop in GAAP operating expenses to $2.8M kept a lid on losses - $2.1M of the spending was on G&A. Rubicon ended Q1 with $41M in cash/short-term investments, and no debt; its market cap is currently $94M.
- Q1 results, PR
Apr. 15, 2015, 3:19 PM
- With the Nasdaq up 0.8% in the wake of a well-received Intel Q1 report, major tech gainers are easily outpacing decliners.
- Notable gainers include 4G router/M2M module maker Sierra Wireless (SWIR +3.6%), security tech plays KEYW Holding (KEYW +6.9%) and Vasco (VDSI +5%), Chinese mobile game publisher iDreamSky (DSKY +11.1%), sapphire wafer/substrate provider Rubicon (RBCN +9.1%), and telecom equipment vendors Ubiquiti (UBNT +4%). Sonus (SONS +3.6%), and Adtran (ADTN +4.1%).
- Sierra, Ubiquiti, Sonus, and Adtran could be benefiting from hopes the Nokia/Alcatel-Lucent merger will spark fresh telecom equipment M&A. Rubicon's gains come a day after shares closed just $0.15 above a 52-week low of $3.56.
- Previously covered: 3D printing stocks, chip stocks, First Solar, Enphase, Mobileye, Yandex, Universal Display, Geospace, Mellanox/QLogic, Angie's List
Feb. 12, 2015, 2:45 PM
- Machine vision hardware provider Cognex (CGNX +4%), sapphire wafer vendor Rubicon (RBCN +5.4%), and stock photo marketplace Shutterstock (SSTK +6.1%) have each rallied ahead of their calendar Q4 report, which are due after the close.
- Cognex and Shutterstock have each seen volume well above their 3-month daily averages. Rubicon's volume is close to a 3-month of 366K.
Dec. 22, 2014, 3:51 PM
- Taiwanese LED industry sources tell Digitimes the Chinese government "has ordered its subordinate agencies and local governments to stop offering subsidies and tax incentives for China-based LED epitaxial wafer and chip makers because such offering has disrupted market mechanisms and may violate WTO rules."
- Cree (CREE +3%), which has lost mid-power LED chip share to low-cost Chinese manufacturers, could benefit from the ending of subsidies. As might Taiwan's SemiLEDs (LEDS +6.3%) and U.S. LED wafer supplier Rubicon (RBCN -3.5%).
- On the other hand, equipment suppliers Veeco (VECO +2%) and Aixtron (AIXG -1.2%) could see their Chinese orders slump. Aixtron soared in September after landing a major order from Chinese LED chipmaker San'an Optoelectronics. Digitimes notes San'an has received generous subsidies from the Xiamen city government, and has placed major orders with both Aixtron and Veeco.
Nov. 7, 2014, 4:57 PM
- Initially lower after posting mixed Q3 results and once more providing a downbeat outlook, Rubicon (NASDAQ:RBCN) finished the day up 9.6%.
- The sapphire wafer vendor notes industry oversupply led pricing for 2" core wafers to fall 30% Q/Q in Q3. It's seeing "increasing interest in two-inch material" in Q4, but also declares 4" demand to be "very weak" due to above-normal LED backlighting market seasonality.
- Q4 revenue is expected to be "similar" to a Q3 level of $8M; that puts it below an $11.5M consensus. EPS is expected to be in a range of -$0.38 to -$0.42, below a -$0.35 consensus. Rubicon expects revenue to rise in Q1 2015, aided by improving 4" wafer demand.
- A $9.5M gross loss was seen in Q3 on $8M in revenue. GAAP opex rose 34% Y/Y to $4.4M.
- Rubicon ended Q3 with $53M in cash/investments (compares with a $115M market cap), and no debt.
- Q3 results, PR
Oct. 22, 2014, 2:50 PM
- Canaccord and D.A. Davidson have downgraded Cree (CREE -16.7%) to neutral ratings after the company offered a weaker-than-expected FQ2 outlook and reported a 580 bps Q/Q gross margin drop.
- Canaccord's Jonathan Dorsheimer, who wasn't quite enthusiastic about reiterating a Buy following Cree's Oct. 2 FQ1 warning: "In spite of the fact that we may be...marking the bottom for CREE shares, we simply fail to see a potentially positive catalyst ... Our thesis was based around the transition from captive to merchant sales in Cree’s components [business], which at best has been pushed by 6-9 months now."
- He adds Canaccord's research confirms Cree has lost LED component share to Philips' Lumileds unit, and that a shift towards mid-power LED sales in China is also taking a toll.
- Cowen's Jeffrey Osborne (Market Perform) thinks margins will stabilize as Cree cuts factory output, continues seeing healthy lighting and power/RF growth, and gets a lighting margin boost from a mix shift to non-bulb lighting products. He's still cautious on account of Cree's near-term LED component challenges, but expects the company's technology strengths will help its cause long-term.
- Fellow LED industry names Rubicon (RBCN -2.3%), Veeco (VECO -3.7%), and Aixtron (AIXG -2.5%) are also lower.
Oct. 10, 2014, 12:45 PM
Oct. 7, 2014, 5:40 PM
Rubicon Technology, Inc. is a vertically integrated, advanced electronic materials provider specializing in monocrystalline sapphire for applications in light-emitting diodes, optical systems and specialty electronic devices. The company applies its proprietary crystal growth technology to... More
Industry: Semiconductor - Specialized
Country: United States
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