On Jan 9, 2014, we downgraded our recommendation on
MKS Instruments, Inc.
) to Neutral from Outperform. Despite an increase in product
launches, loss due to negative impacts from the foreign currency
translation is a matter of concern and primarily led to the
Why the Downgrade?
MKS Instruments operates in a highly competitive market. In
the semiconductor-related industry, major portion of the revenues
is generated through company-owned patents. However, in
situations where these patents are not renewed, the company may
face a major blow.
Additionally, in order to remain competitive and sustain its
performance over the long term, MKS Instruments needs to keep
inventing products. However, a product development may take as
long as 30 months, during which any other player may develop an
MKS Instruments' major customers, the semiconductor equipment
manufacturers, are based in regions outside the U.S. such as
Japan, Taiwan and Korea. This exposes the company to foreign
currency fluctuation risks. Moreover, the socio-political and
economic risks associated with these regions raise concerns.
MKS Instruments is trying to counter these headwinds through
product launches which in turn will lead to market share gain.
The possible use of sapphire in mobile displays, by replacing
glass, opens up additional opportunities for the company, given
its multiple sapphire production tools. These products are
expected to drive the company's revenues. Also, MKS Instruments
has a strong and loyal customer base.
Other Stocks to Consider
This Zacks Rank #3 (Hold) company has a current market
capitalization of $1.6 billion. Some better-ranked stocks in the
Advanced Energy Industries, Inc.
Alliance Fiber Optic Products Inc.
). While Advanced Energy Industries and Finisar Corp. carry a
Zacks Rank #1 (Strong Buy), Alliance Fiber Optic Products holds a
Zacks Rank #2 (Buy).
ADV ENERGY INDS (AEIS): Free Stock Analysis
ALLIANCE FIBER (AFOP): Free Stock Analysis
FINISAR CORP (FNSR): Free Stock Analysis
MKS INSTRUMENTS (MKSI): Free Stock Analysis
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