Two LED lighting plays that were on fire last year appear to be in the beginning stages of rolling over after torrid runs and downgrades from Merriman Curhan today didn’t help.
Hat tip to Street Insider for the analyst comments which are nearly identical.
CREE was downgraded from Buy to Neutral “We are concerned that extraordinarily strong MOCVD tool bookings from 2H09 to 1H10 could lead to near term over capacity that could in turn lead to LED pricing pressure impacting Cree in late 2010. Furthermore we believe Cree is trading at a 2011 valuation level comparable to Intel’s (INTC, $19.68, Not Rated) 1995 peak valuation level during the analogous height of the PC adoption cycle with INTC at 4.8x P/S and 25x P/E versus CREE at 5.3x P/S and 27.2x P/E.”
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AIXG also downgraded from Buy to Neutral “We are concerned that extraordinarily strong MOCVD tool bookings from 2H09 to 1H10 could lead to a near term over capacity that would impact Aixtron in late 2010. We believe Aixtron is trading at a 2011 valuation level comparable to Applied Materials (AMAT $12.28; Not Rated) 1995 peak valuation level during the analogous height of the PC adoption cycle with AMAT at 4.0x P/S and 34x P/E versus Aixtron at 3.8x P/S and 21x P/E. Furthermore while AMAT’s 1995 market cap at $10B was below the chip equipment market of $12.1B, AIXG’s market cap at $3.6B exceeds the 2011 LED equipment market of $2.2B. Aixtron recently released its 4Q09 revenue and EBIT estimates and as a result we have raised our FY09 EPS from 0.37 to 0.46. We have also raised our FY10 EPS from 0.85 to 1.05.”