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Rubicon Rises as Analysts Shrug Off Sapphire Pricing Concerns

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Feb. 1 (Bloomberg) -- Rubicon Technology Inc., the largest U.S. sapphire maker, rose the most in two months after analysts said they don’t expect new competitors to drive down prices.

The company rose 1.8 percent to $18.34 in Nasdaq Stock Market trading. Earlier it climbed 6 percent, the biggest intra-day gain since Dec. 1. Bensenville, Illinois-based Rubicon makes makes sapphire ingots and wafers that are used in light-emitting diodes.

Prices of two- and four-inch wafers may fall as much as 40 percent this year, according to a research report issued today by Christopher Blansett, an analyst at New York-based JP Morgan Securities LLC. He said there will be a “slight downtick” in prices for six-inch sapphire wafers, which are expected to make up 60 percent of Rubicon’s sales this year.

Investors have sold short 57 percent of Rubicon’s shares, the highest percentage on the Nasdaq, according to data compiled by Bloomberg. Its shares have dropped 13 percent this year.

Blansett said that bearish investors are wary that increasing competition in the sapphire market will increase supply and reduce prices. He reiterated the “overweight” rating and 12-month target price of $36 a share that he has had since Sept. 14.

Rubicon and other companies that supply components for LEDs may “exceed a 30 percent compound annual growth rate over the next few years, versus a 10 to 15 percent revenue growth for other alternative energy companies and justifies a healthy premium in terms of valuation,” Blansett said in the report. LEDs are widely used for consumer and industrial lighting applications.

In a separate report, Avinash Kant, an analyst at Great Falls, Montana-based D.A. Davidson & Co., reiterated the “buy” recommendation he has had on Rubicon since May 7 and a $40 price target.

Raja Parvez, Rubicon’s chief executive officer, said he is not concerned about oversupply. “I haven’t heard that based on customer interaction,” he said in an interview yesterday.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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