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Oct. 21, 2014, 6:43 PM
- CREE's gross margin fell 550 bps Q/Q and 680 bps Y/Y in FQ1 to 32.4%; before, the company had only forecast GM would be below an original target of 37.5%. A GM of ~33.5% is expected in FQ2.
- There were two major culprits: A 770 bps Y/Y drop in Cree's LED chip/component GM to 39% (caused by declining sales and price pressure), and a revenue mix shift toward LED lighting products, which carried only a 24.9% GM (-200 bps Y/Y).
- LED chip/component revenue fell 20% Y/Y to $173.6M, while lighting products revenue rose 51% to $223.1M. Power/RF product sales (carried a 57.6% GM) rose 24% to $31M.
- GAAP opex rose 9% Y/Y to $124.4M, even with revenue growth.
- Cree ended the quarter with $1.1B in cash/investments (a figure equal to 31% of the company's current market cap), and only $45M in debt. Are buybacks on the way?
- FQ1 results, PR
Oct. 21, 2014, 5:38 PM
Oct. 21, 2014, 4:13 PM| Oct. 21, 2014, 4:13 PM
Oct. 20, 2014, 5:35 PM
Oct. 3, 2014, 1:58 PM
- "We are concerned that the pricing pressure Cree faces in the LED component business could persist in the next few quarters," says Needham's Edwin Mok, downgrading Cree (CREE -2.6%) to Hold in response to its FQ1 warning. The cut follows a Thursday downgrade from Oppenheimer.
- Mok argues the LED industry's continued shift to mid-power products (often used for indoor lighting) will take a toll on Cree until its investment/supply deal with mid-power Taiwanese LED chipmaker Lextar begins bearing fruit.
- "Thank goodness we downgraded!," exclaims Summit Research's Srini Sundararajan about his August ratings cut. He thinks Cree's warning and cautious FQ2 remarks suggest it has lost a client, and is skeptical GE, Samsung, or Philips (often brought up in M&A rumors) will want to buy the company.
- Canaccord's Jonathan Dorsheimer maintains a Buy, but has cut his target by $23 to $41. He suspects Cree's mid-power issues are compounded by a loss of high-end share, and questions the wisdom of its vertical integration strategy (could be upsetting chip/component buyers).
- Gabelli's Hendi Susanto remains a believer. "We believe LED lighting is still [well-positioned] to gain market adoption in the long run ... For a vertically integrated market leader in the LED industry, we view CREE’s valuation is appealing, 9.0x EV/EBITDA based on our 2016 estimates."
Oct. 2, 2014, 12:45 PM
Oct. 2, 2014, 9:18 AM
Oct. 2, 2014, 9:17 AM
- Due to weak LED chip/component sales, CREE now expects FQ1 revenue of $428M, below prior guidance of $440M-$465M and a $455.3M consensus. GAAP EPS is expected to be below guidance of $0.25-$0.30; the non-GAAP consensus is $0.42.
- Chip/component sales are expected to fall 13% Q/Q and 20% Y/Y to $174M; the latter is a bigger decline than FQ4's 8%. LED lighting sales are expected to rise 7% Q/Q and 51% Y/Y to $223M, and power/RF sales 8% Q/Q and 24% Y/Y to $31M. LED lighting sales were near the high end of target ranges.
- A mix shift towards LED bulbs relative to chips/components will lead gross margin to be below prior targets; prior non-GAAP gross margin guidance was 37.5%. $54.3M was spent on buybacks during the quarter.
- Cree adds FQ2 "order visibility remains limited and similar to this point in the first quarter."
- Shares are making new 52-week lows. Cree has been dealing with tough LED chip/component competition in the mid-range, where (thanks to indoor LED lighting demand) much of the industry's growth has been concentrated. Goldman's downgrade was well-timed.
Sep. 30, 2014, 12:34 PM
- Cree (CREE -0.9%) claims its new ZR HE LED troffer sets a new "efficiency standard" by delivering 150 lumens of light for each watt of power consumed. Potential applications are seen in "healthcare, petroleum, commercial building and other applications demanding extreme reliability and long product lifetime."
- Cree's lighting product sales rose 56% Y/Y in the June quarter to $208.2M, while its LED chip/component sales fell 8% to $199.5M. Products such as the troffer play to the company's strong position in the high-end LED component space. Cree has been having a rougher time battling with Asian rivals in the mid-range.
Sep. 23, 2014, 1:58 PM| Sep. 23, 2014, 1:58 PM | 1 Comment
Sep. 15, 2014, 7:40 AM
- Positive on LED lighting adoption, analyst Brian Lee says CREE shares have already price in solid execution in this segment by the company. Cree's price in the mid-term will instead be driven by the chip business (LED chip cycle accounts for 50% of Cree revenue) where Cree faces numerous headwinds. He downgrades to Neutral and cuts the price target to $48 from $60.
- Acuity Brands (NYSE:AYI) is the play in LED lighting, he says, upgrading the stock to a Buy with price target raised to $153 from $128.
- "We expect Acuity to see continued upside in growth vs. peers, as well as margin stability and FCF generation, given tailwinds from (1) “smart lighting” – where Acuity is growing in the $3-$4B sensors/controls market and (2) non-resi construction – where near-term trends suggest upside, plus LED paybacks are favorable vs. retrofits."
- CREE -3.1%, AYI +1.6% premarket
Aug. 13, 2014, 12:07 PM
- CLSA and Summit Research have downgraded Cree (CREE -9.1%) in response to the company's FQ4 revenue miss and light guidance. Needham and Northland have lowered their targets.
- Summit, which has downgraded to Hold, cites gross margin concerns - Cree's GM beat expectations in FQ4, but has been pressured by a mix shift towards lower-margin LED lighting sales (+56% in FQ4) relative to component sales (-8%). The firm still expects 21.4% FY15 (ends June '15) revenue growth, above a 19.7% consensus.
- BofA/Merrill (Underperform) is worried about competition in the component space. "Cree is well-positioned in the high-power LED market, but significant demand ... is for medium-power chips. High-power chips are good for the outdoor and automotive lighting markets, but indoor applications more frequently use medium-power."
- On the CC (transcript), CEO Chuck Swoboda mentioned LED component customers/distributors have short lead times (indicates softer demand), even as longer lead times are seen in the merchant sapphire LED chip market.
- He added component demand is "primarily driven by mid-power LEDs for consumer lighting and lower-end indoor commercial," but thinks it's possible the trend will ultimately boost high-power component sales.
Aug. 13, 2014, 9:15 AM
Aug. 12, 2014, 5:37 PM
Aug. 12, 2014, 4:14 PM
- CREE expects FQ1 revenue of $440M-$465M and EPS of $0.40-$0.45, below a consensus of $469.8M and $0.46.
- FQ4 gross margin was 37.9%, +10% Q/Q and -30% bps Y/Y, and above guidance of 37.5%. That helped EPS beat estimates in spite of a revenue miss. FQ1 GM guidance is also at 37.5%.
- LED product sales (chips/components) -8% Y/Y to $199.5M, a reversal from FQ3's 3% growth. Lighting products +56% to $208.2M, better than FQ3's +35%. Power/RF products +19% to $28.6M after growing 21% in FQ3.
- LED products GM was at 45.1%, lighting products at 29.1%, and power/RF at 56.9%.
- GAAP opex +19% Y/Y to $130.5M. SG&A spend totaled $70.9M, and R&D $48.6M.
- FQ4 results, PR
Aug. 12, 2014, 4:02 PM
- Cree (NASDAQ:CREE): FQ4 EPS of $0.42 beats by $0.01.
- Revenue of $436M (+16.3% Y/Y) misses by $8.11M.
- Shares -7%.
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