NEW YORK ( TheStreet) -- Rubicon Technology ( RBCN) has been a short seller favorite among LED stocks, and shorts weren't exactly running scared after another easy beat and raise by Rubicon, which it posted on Thursday after the market close.

Rubicon produces the sapphire substrate required for production of LEDs, and it's business has risen rapidly as Asian LED manufacturers ramp, among them, the LED manufacturers fostered by Chinese government subsidies. At the same time, though, more competition is coming into the sapphire substrate market, including U.S. solar equipment vendor GT Solar ( SOLR).

While Rubicon shares rallied in Thursday's after-market trading, by Friday morning Rubicon shares were down by 4% on heavy volume -- it had surpassed double its average volume by the mid-day mark.

How can a company that keeps beating the average analyst estimate easily trade down? There are probably three reasons why pressure remains on Rubicon shares: the peak gross margin argument, pricing pressure, and a new tax rate for the company which could negatively impact earnings per share estimates.

Rubicon reported first quarter earnings per share of 80 cents on revenues of $38 million (up 29% from the fourth quarter and up 230% from the first quarter.) The first quarter earnings surpassed the consensus expectation for 66 cents EPS on revenue of $36 million.

Gross margin improved to 63% in the first quarter, versus a consensus expectations of 55%, as pricing remained strong.

Second quarter guidance from Rubicon calls for earnings per share of 82 cents to 86 cents on revenue of $40 million to $43 million, again, above the consensus of 68 cents earnings on $41 million in revenue.

Yet even beating and raising, Rubicon guided to lower gross margin, in the high 50% range and for pricing to be down by 2%.

Gross margin declines and pricing pressure have been staples of the bear case on Rubicon, but D.A. Davidson analyst Avinash Kant noted in his reiteration of a buy on Rubicon on Friday that the reduced gross margin guidance is still above the average analyst estimate of 52% for the second quarter, and Rubicon's expectation for a 2% decline in pricing is much better than expectations.

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