Veeco Showing Signs Of A Longer-Term Transition To A Better Model

Although I thought Veeco (VECO) was undervalued in November of 2018, I didn’t expect the strong rebound in the share price, and I definitely underestimated the Street’s enthusiasm for the changes management was making to the business. To be fair, it’s not just a change in perception that I believe has driven the share price move; I believe Veeco has a better strategy and business plan in place now, and I underestimated the growth potential that such a shift could bring into the picture.

Veeco’s decision to move away from commoditized markets like blue LED and embrace more front-end equipment (not to mention equipment that enables leading-edge chip production) should bode well for growth and margins. Exactly how much it will margins is a big question when trying to figure out the valuation. If the changes management has made can put the company in a position to generate long-term EBITDA margins in the 20%’s and FCF margins in the mid-teens, there could still be further upside from here.

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Veeco Showing Signs Of A Longer-Term Transition To A Better Model