LED lighting specialist Cree (Nasdaq: CREE) is coming out of this week's market bloodbath with a smile on its illuminated lips. Shares jumped as much as 20.2% on Wednesday thanks to a terrific earnings report.

Sales fell 8% year-over-year to $243 million but still came in ahead of analyst projections; non-GAAP earnings per share dropped from $0.55 to $0.28 but again stayed ahead of Street estimates.

The stock had lost a shocking 57% of its value since the last earnings report, and this pop doesn't come close to repairing that damage. But the shares look very cheap at these levels -- missing the absolute bottom over the last week or so shouldn't scare you away from taking a closer look at Cree.

Revenue actually bounced back 11% from a low point in the third quarter. We're at the cusp of a market revolution as federal regulations will put a stop to traditional incandescent light bulbs, starting with some tighter rules in 2012 and ending with a nearly all-out ban by 2020. Bulb makers Siemens (NYSE: SI), Philips (NYSE: PHG), and General Electric (NYSE: GE) will simply shift into more of those twisty fluorescent bulbs, but then they're losing their lucrative incandescent sales instead.

But Cree will make huge inroads with its plethora of diodes, control chips, and even entire lighting armatures featuring low-power LED light. This proven technology is also years ahead of OLED lighting panels like the ones Universal Display (Nasdaq: PANL) is developing, giving Cree a few years of relatively unchallenged share gains.

"We are well positioned to continue to lead the LED lighting revolution," says Cree CEO Chuck Swoboda, and that's not just insider swagger. The market for LED components is currently flooded by large supplies and pretty low demand, and Cree is priced to match. But this won't last.

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