Goldman Upgrades Veeco To Buy; Shares Jump 14%

Goldman Sachs upgraded Veeco Instruments to Buy from Hold and lifted the stock’s price target to $16 (45.5% upside potential) from $13.50, pushing shares up more than 14%.

Goldman analyst Brian K. Lee said that Veeco (VECO) should benefit from the ongoing node transition to 7 nm and below in the upcoming cycle. Lee is confident that the semiconductor equipment provider will return to double-digit revenue growth in the 2021-2022 period. Furthermore, the analyst notes that the current valuation is “compelling” and provides “significant runway” for the shares to re-rate as the company executes on its “higher-margin, more-diversified” equipment platform.

Last month, Veeco reported better-than-expected 2Q results. Earnings of $0.11 per share, surpassed the Street consensus of $0.07. 2Q revenues of $98.6 million also beat analysts’ expectations of $97.8 million. Veeco’s CEO William J. Miller said “We have strong customer engagements across multiple product lines and have a healthy backlog. Our Scientific and Industrial market continues to perform well driven by sales to our data storage customers.” Miller added that the company’s “transformation is delivering financial results and we are optimistic about the second half of the year.” (See VECO stock analysis on TipRanks).

For 3Q, the company expects revenue in the range of $100 million to $120 million and adjusted earnings in the range of $0.10 to $0.26 per share.

Currently, the Street has a bullish Strong Buy consensus on the stock with on unanimous 5 Buy ratings. The average price target of $18.20 implies upside potential of a stellar 65.5% to current levels. Shares have declined 18.3% year-to-date.