Veeco's long-term outlook remains positive, good risk/reward:
from Salomon Smith Barney
Veeco's 1Q99 is tracking to plan to meet expectations outlined in
December's conference call. Specifically, we expect Veeco to meet our $54 million sales estimate, book-to-bill of 1.1+, and earnings of $0.30. Bookings in the process equipment segment are tracking to $30 million (which is an appreciable improvement from $22 million in 4Q98) and overall, we expect bookings in the $60 million range. Recently, Veeco received an order for $14 million which gives us increased confidence in our $60 million bookings estimate. The Japanese (TDK, Sony, Fujitsu) head/drive companies are beginning to transition to GMR and this should continue to drive orders in the upcoming quarters. We are conservatively forecasting mid to high single digit sequential revenue growth over the next three quarters. Our full-year 1999 forecast looks for 16% year-over-year revenue growth to $239 million and EPS of $1.48.
Reiterate Outperform Rating
Given that we believe our long-term thesis regarding the drivers to
Veeco's revenues are still intact, we reiterate our Outperform rating and price target of $70. Veeco's shares are extremely volatile but we remind investors to focus on the longer term picture.
Veeco is the leading equipment supplier to the storage sector and its equipment is indispensable for the inevitable transition to GMR heads. The shares have traded as high as 4x forward calendar year sales in an upturn and as low as 1.5x forward sales in an downturn.
Excellent Risk/Reward For Medium and Long-Term Investors
At 1.7x our 2000 sales per share estimate of $17.6 and 15x our 2000 EPS of $2.05, we believe the shares represent an excellent risk/reward for medium and long-term investors. However, with the storage/disk companies expecting a flat environment until after the June quarter, the shares lack a short-term catalyst. We believe the catalyst to share price appreciation is an improving outlook for the storage industry. While there is a risk that the shares could retreat to its previous trough valuation of 1.5x sales, which implies a price in the low-to-mid 20's, we believe the upside potential of over 100% outweighs the downside risk. |
