|Written by GSCR Staff|
|Wednesday, 06 November 2013 09:16|
We will continue the theme from Monday and discuss another stock to consider taking “some off the top.”
Rubicon Technology (NASDAQ – RBCN – $9.73) is up nearly 54% since our highlight earlier this year. While the stock is still a great long term play in the red hot LED space, there are three reasons why it is time to skim some profits
First, the charts are now very bearish in the Daily Moving Average over all durations. The stock hit climbed over the $13 level a little less than two months ago, and has been on a negative momentum run since.
Second, there was a nice 10% run yesterday alone as a side play on the news of the $578 million deal between GT Advanced Technologies (NASDAQ – GTAT) and Apple, Inc. (AAPL). RBCN was up close to 27% in the middle of the day, before settling down to the ‘modest’ gain. Take some of the money and run with the deal.
Third, and finally, RBCN has had a few downgrades recently from other Wall Street banks. Oppenheimer downgraded the stock from Outperform to Underperform in early October. The trend of underperforming quarterly financial reports could not have helped. Rubicon missed on 3Q13 EPS estimates and lowered expectations for 4Q13 EPS when it reported financial results last month. This marked the fourth straight quarter the Company was in the red in EPS and missed the forecast.
Again, with the LED application technology continuing to be a viable and extremely profitable market, RBCN is in the right space and a good small cap long term play. Revenue is forecast to increase 44% next year. Like we discussed yesterday, it may be time to sell some shares and take some profit. Another riskier strategy could be selling some out of the money covered calls.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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