Two Reasons to Sell IPG Photonics Corporation (IPGP) Stock Today

With the competition, IPG Photonics Corporation (NASDAQ:IPGP) decided to further differentiate itself by becoming vertically integrated. Usually, a laser-making company will contract out for component parts, like laser diodes, to be delivered and then assembled by its own people. IPG, on the other hand, does everything—from manufacturing the small component parts to assembling them to shipping them off the customers—in house.

During boom times, this is great for business. IPG Photonics Corporation (NASDAQ:IPGP) is able to get all of its component parts for much cheaper than JDS Uniphase Corp (NASDAQ:JDSU), Coherent, Inc. (NASDAQ:COHR), and Rofin-Sinar Technologies (NASDAQ:RSTI). That makes it easier to turn a profit and/or offer lasers for cheaper than the competition.

During difficult economic times, however, the situation gets flipped on its head. JDS Uniphase Corp (NASDAQ:JDSU), Rofin-Sinar Technologies (NASDAQ:RSTI), and Coherent, Inc. (NASDAQ:COHR) can simply order less component parts and spend less money in the face of less demand. IPG Photonics Corporation (NASDAQ:IPGP), however, has a certain amount of fixed overhead costs it will have to pay no matter the economic climate.

IPG Photonics Corporation (NASDAQ:IPGP) stock, therefore, can get hit much harder during downturns than the competition’s.

What’s a Fool to do?
To be honest, the concerns over vertical integration don’t bother me too much, as I think the boom times typically occur with greater frequency than bust times. The first concern — over being disrupted — is one that I definitely need to keep my eye on.

The article 2 Reasons to Sell IPG Photonics Stock Today originally appeared on Fool.com and is written by Brian Stoffel.

Fool contributor Brian Stoffel owns shares of Apple, Google, Amazon.com, and IPG Photonics. The Motley Fool recommends and owns shares of Amazon.com, Apple, Facebook, Google, IPG Photonics, and Rofin-Sinar Technologies.

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