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On Thursday, Needham, a research firm, adjusted its outlook on Veeco Instruments Inc. (NASDAQ:VECO), reducing the price target from the previous $35.00 to $29.00. Despite this change, the firm continues to endorse the stock with a Buy rating. The adjustment followed Veeco’s fourth-quarter earnings for 2024, which aligned with general market predictions. However, the company’s guidance for the first quarter of 2025 fell short of the consensus expectations, although it matched Needham’s own projections. The stock currently trades at $23.65, near its 52-week low of $23.00, with InvestingPro analysis indicating the stock is currently undervalued based on its Fair Value model.
Veeco’s management anticipates a decline in China revenue for 2025, with estimates suggesting a 35% year-over-year decrease. Nevertheless, the company’s executives expressed a growing optimism regarding the advanced packaging and gate-all-around (GAA) sectors, predicting that revenue from these areas would double in 2025. This positive outlook provides a counterbalance to the anticipated revenue decline from China. The company maintains strong liquidity with a current ratio of 3.54, and InvestingPro data shows revenue growth of 9.71% over the last twelve months.
According to Needham, Veeco’s overall business is expected to see a slight decline next year. The Semiconductor segment is projected to remain relatively stable or experience a minor increase, while the Data Storage segment is likely to be the primary contributor to the overall sales decline for the year 2025. Following these projections, Needham has decided to maintain its revenue estimates for 2025 and 2026 but has revised its earnings estimates downward.
The revision of the price target to $29.00 reflects the mixed factors influencing Veeco’s business outlook. While certain segments show promise of growth, others are expected to face challenges, leading to an overall conservative stance on the company’s financial performance in the near term. Despite the lowered earnings estimates and price target, Needham’s continued Buy rating indicates a belief in Veeco’s long-term potential.
In other recent news, Veeco Instruments Inc. has revised its fourth-quarter and full-year 2024 financial guidance. The company now anticipates fourth-quarter revenue to range between $175 to $185 million, with full-year revenue expected to fall between $710 to $720 million. Adjusted figures reflect a net impact on Q4 2024 GAAP Net Income due to the company’s Silicon Carbide Epitaxy technology not meeting market penetration expectations.
On the analyst front, Citi has upgraded Veeco Instruments from Neutral to Buy, reflecting a positive outlook on the company’s expanding Serviceable Available Market and its gains in laser annealing and nanosecond annealing technologies. The firm anticipates that Veeco’s AI-related semiconductor revenue will double its contribution to the company’s total sales, increasing from 10% in 2024 to an expected 20% in 2025.
In other developments, Veeco announced a partnership with PlayNitride, a pioneer in MicroLED technology. PlayNitride has qualified Veeco’s Lumina® Metal Organic Chemical Vapor Deposition (MOCVD) system for the production of MicroLEDs and has placed an order for two systems, scheduled for delivery in 2025. Lastly, Veeco expects minimal impact from new U.S. export regulations, stating that it does not foresee a significant effect on its business in China following the introduction of new U.S. export rules.
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