Goldman Sachs Released LED/OLED Industry Analysis Report

Nov 18, 2011 Forbes reports on the release of the Goldman Sachs analysts report on LED/OLED industry. According to the report, Goldman Sachs analyst Brian Lee appointed Buy ratings on LED lighting company Cree and OLED technology company Universal Display; LED equipment maker Veeco received a Neutral rating, and sets a Sell on Rubicon Technology.

“We initiate coverage of the U.S. LED industry with a constructive view,” he writes in his 126-page report on the LED sector. “We see adoption of general lighting as a multi-decade opportunity paving the next phase of LED growth, as end users recognize the cost savings potential of LED lighting. We see the most upside in LED stocks with leverage to high-growth lighting adoption and would avoid exposure to maturing cycles (e.g. TVs). We estimate lighting is an $11 billion revenue opportunity for LEDs by 2015, almost 2X that of TVs – the current cycle – and other electronics at their peak. We estimate LED lighting to grow at a 30%+ unit CAGR through 2020, with penetration reaching over 50% vs. less than 5% today.”

Here’s a quick look at his thinking on all four stocks:

Cree: He sets a $40 target on the stock. “We see Cree as a structural winner where (1) superior technology drives better leverage to lighting vs. scale-driven, commoditized rivals and (2) margins are underappreciated in Street numbers.”
Universal Display: He sets a $68 price target. “As the new LED, the OLED market is entering its first adoption cycle, where we see Universal’s IP-centric model resulting in a dominant technology advantage and high returns.”
Rubicon: He sets an $8 price target. “We see more risk than reward vs. peers owing to oversupply risks, prolonged pricing weakness and high capital intensity.”
Veeco: His target here is $28, 11% above yesterday’s close. He cautions that “moderating demand for MOCVD tools” – equipment the company makes for producing LEDs – is ” not fully reflected in current consensus estimates.”
In Friday morning trading:

CREE is up $1.38, or 5.2%, to $28.10.
PANL is up $2.99, or 5.9%, to $53.97.
RBCN is down 25 cents, or 2.3%, to $10.49.
VECO is up 60 cents, or 2.5%, to $24.88.


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