Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rubicon Technology sank as low as 12% today after Oppenheimer downgraded the electronic materials provider from perform to underperform.

So what: Along with the downgrade, analyst Andrew Uerkwitz planted a price target on the stock of $9 per share, representing about 25% worth of downside to yesterday's close. Rubicon has soared over the past few months on optimism over rebounding growth, but Uerkwitz believes that the market is overestimating demand and underestimating the possibility of added competitor capacity, suggesting that the stock is particularly fraught with risk.


Now what: Oppenheimer thinks that Rubicon's management, despite making all the right moves, will struggle to turn a profit in 2014. "We are more pessimistic due to: 1) recent pricing increases are not sustainable based on our model, and 2) new demand from non-LED applications is not enough to greatly reduce overcapacity," Uerkwitz noted. Given that the stock is still up about 140% from its 52-week lows and trading at a price-to-sales multiple of almost 5, it's tough to disagree that Rubicon's downside looks worrisome.

Even more compelling tech picks
The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to rule the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

The article Why Rubicon Shares Got Rocked originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Investing Like Warren Buffett

Learn from one of the world's best investors.

View Course »

Portfolio Basics

What are stocks? Learn how to start investing.

View Course »

Add a Comment

*0 / 3000 Character Maximum