UBS Boosts PT on Rubicon (RBCN) to $12; Demand is Strong, but Profits Aren't Guaranteed

UBS raisees its price target on Rubicon Technology (Nasdaq: RBCN) from $9.50 to $12 today, while maintaining a Neutral rating on the stock.

Analyst Stephen Chin said checks indicate that Rubicon's sales to China are up 30 percent for the March quarter. The analyst continued, We estimate Rubicon's average selling price for its 2-inch cores is tracking up 9% q/q to $4.1/mm. Our proprietary China LED tracker continues to show that fab utilization rates in China are tracking in low 90s and Chinese LED fabs are likely placing rush MOCVD equipment orders in the near term. We believe this could be a near term positive for the LED sapphire demand; however, we estimate sapphire is still in 10-15% oversupply which likely limits the near term upside on sapphire prices.

Despite market demand, profitability would be limited to wafer size, Chin said. We note that while Rubicon's crystal growth operations are size agnostic its Malaysian polishing factory remains heavily underutilized (estimate 10-20% utilization rate) due to lower demand for higher wafer size. With lower demand for its 6-inch wafers from the LED customers such as LG Innotek and non-LED customers such as Peregrine, we estimate Rubicon's operating breakeven point will likely be in 2015. So despite near term strength in sapphire demand we maintain our Neutral rating on the stock, the analyst commented.

For an analyst ratings summary and ratings history on Rubicon Technology click here. For more ratings news on Rubicon Technology click here.

Shares of Rubicon Technology closed at $11.16 yesterday.

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