- Expectations on LED manufacturers such as Cree are pretty aggressive, leaving limited upside going forward for these stocks.
- But LED fundamentals are strong, leading several manufacturers to raise their capex plans. This is an obvious positive for equipment players and specifically for Veeco.
- Equipment bookings have been weak until now but we believe that they are likely to recover soon in view of the recent capex announcements.
- The downside risk on Veeco is limited in view of low expectations, while the upside could be huge if our bull scenario materializes (higher bookings and pricing and strong beta).