NEW YORK ( TheStreet) -- The 2011 outlook from from LED market player SemiLEDs ( LEDS) is sinking its own shares and hit the entire LED sector on Thursday morning.

Shares of SemiLEDs, which went public in December, have risen by 25% since its IPO, rising from $25 to above $30. However, in early trading on Thursday morning, SemiLEDs shares fell by 33% to below the $19 mark.

SemiLEDs revenue guidance for the next quarter was below its Nov. 30-ended quarter, when revenue was $13 million. The LED market company is now expected to post revenue in a range of $10.5 million to $12.5 million.

Gross margin is also expected to drop from 51% to a range of 44% to 46%.

Commentary about pricing in the LED market was a point of confusion on the SemiLEDs conference call as it relates to any LED sector basket trading call.

Theodore O'Neill, analyst at Wunderlich Securities, sat in on the SemiLEDs conference call on Thursday morning when the company's CEO said that there was pricing weakness in the general lighting market. If that's the case, all the LED stocks would be pressured as the general lighting market is the major opportunity for the sector.

"All the LED stocks take a hit on general lighting weakness, if it's true," O'Neill said. However, later in the call, the SemiLEDs CEO expanded on his comment, to say that the pricing pressure was specific to the cell phone LED camera flash market, which is a niche market, and not a major mover of LED demand. To a much greater extent, stocks like Cree and the LED equipment makers Veeco and Aixtron move up or down based on the outlook in the flat panel display market, and general illumination.

SemiLEDs attracted a lot of attention for its IPO in the volatile LED sector through its ties to the Asia market, but some analysts in the sector believe that the deal was overhyped.

SemiLEDs was sticking to its story on Thursday morning, stating in its earnings release, "The LED lighting market remains strong, particularly within Asia and we are well positioned to take advantage of this opportunity both through our Taiwan operations and China SemiLEDs."

Shares of Cree ( CREE), Aixtron ( AIXG), and Veeco Instruments ( VECO) all fell by 5% in early trading on Thursday, but those losses quickly narrowed.

It doesn't take much to move the LED stocks lower when they've been rallying. The LED stock sector has been on a rally in recent months with stocks including Cree and Veeco up more than 30% from Fall 2010 lows. However, SemiLEDs may be a case of an overvalued IPO more than a read-through for the sector.

-- Written by Eric Rosenbaum from New York.

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