NEW YORK ( TheStreet) -- LED sector equipment play Veeco Instruments (VECO - Get Report) is always a threat for an earnings-triggered "sell on the news" event, yet Veeco investors aren't waiting for Monday's after hours report to book some profits. A Barclays downgrade of Veeco on Monday morning from buy to hold, and more importantly, a price target reduction from $60 to $50 on Veeco shares, has sent the LED stock down close to 3% on Monday morning and Veeco shares were closing in on their average daily volume before the midday mark.
If Barclays chose the Monday morning before the Veeco after-hours earnings report intentionally, to get out ahead of the "sell on the news event," there are plenty of LED market concerns that would support this timing for a negative turn on Veeco shares. However, there are fair counter-arguments to be made that even for those concerned about fundamentals in the LED space, the real pain for Veeco won't show up until later in the year, and its March results, and outlook for the coming quarter, will not yet show the weakness.
Here is a breakdown of the key trading triggers to watch for in the Veeco earnings, and later in earnings season, when Veeco peer Aixtron (AIXG - Get Report) reports. Aixtron shares were down close to 2% on Monday morning after the Veeco downgrade.
Depending on which Wall Street firm you talk to, Chinese government subsidies for the purchase of the MOCVD equipment sold by Veeco and Aixtron have already ended, are about to end, or government policy is so unfathomable from province to province that a bet on when the plug is pulled on these government subsidies is a fool's game.
Yet the Chinese subsidy issue has hung over the head of Veeco and Aixtron for a year and that's not likely to change -- and at some point, as most analysts do expect that the subsidies will be reined in, it's only a matter of timing.