Veeco Seeing A Cyclical Slump Exacerbated By End-Market Capacity Challenges

Veeco (VECO) has hardly been my favorite name in the semiconductor equipment and tool space, but I didn't expect another one-third drop in the price of the shares since my last update. While my worries about LED equipment demand seem to be playing out, weakness in advanced packaging is getting worse, and positive drivers like VCSEL and EUV tool demand seem to be playing out a little slower.

Whether it is companies/stocks like Veeco or Rudolph (RTEC) that I don't like so much or companies/stocks like Advanced Energy (AEIS) and VAT Group (OTCPK:VACNY) that I do like, it's tough to buy these stocks going into order weakness, as you never really know how steep the correction phase of the cycle will be. Although I do believe that Veeco looks undervalued even with a sharp revision to 2019 expectations, the possibility of further downward revisions can't be ruled out, and I don't like the risk/reward balance here.

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Veeco Seeing A Cyclical Slump Exacerbated By End-Market Capacity Challenges