Why Rubicon Technology (RBCN) Stock Is Up In Early Market Trading

NEW YORK (TheStreet) -- Rubicon Technology  (RBCN) shares were up 6.3% to $12.18 in premarket trading Tuesday. The company was upgraded to "overweight" from "neutral" by JP Morgan . The firm raised the price target of the company's shares to $14 from $12.

The company manufactures synthetic materials for electronic devices and JP Morgan believes that the increase in demand for smartphone technology will bode well for Rubicon.

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"Ramping demand for LEDs and sapphire covers used in smartphones and wearable CE devices should drive strong sales of sapphire cores, wafers, and specialized optical components for the industrial sapphire market and for Rubicon," JP Morgan said. 

While Rubicon will not be the go-to name for this production, the firm believes that the company will be in position to pick up "spillover business" as the demand for the technology overwhelms industry leaders. 

"Though GT Advanced Technology (GTAT) and Sapphire Technology (Korea) seem better positioned to secure orders for sapphire covers and lenses for use in the smartphone market, we believe RBCN is positioned to pick up some spillover business that those vendors are unable to handle," the note said.

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Separately, TheStreet Ratings team rates RUBICON TECHNOLOGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate RUBICON TECHNOLOGY INC (RBCN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, RBCN's share price has jumped by 65.08%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • RBCN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.78, which clearly demonstrates the ability to cover short-term cash needs.
  • The revenue fell significantly faster than the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 42.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, RUBICON TECHNOLOGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $0.31 million or 78.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RBCN Ratings Report
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