Why Cree Shares Lit Up

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of LED lighting specialist Cree (NASDAQ: CREE  ) soared 18% today after its quarterly results and guidance easily topped Wall Street expectations.

So what: The stock has slumped over the past couple of years on excess capacity in the LED chip-manufacturing space, but Cree's second-quarter results -- EPS nearly doubled to $0.18 on revenue growth of 14% -- coupled with an upbeat outlook suggest that management's turnaround efforts are gaining steam. Specifically, the company is seeing strong demand for its new products while cost-cutting initiatives are helping boost margins, giving investors plenty of optimism over profitable growth going forward.

Now what: Management now sees third-quarter adjusted EPS of $0.30-$0.35 on revenue of $325 million-$345 million, well ahead of Wall Street's view of $0.28 and $323 million, respectively. "Overall company backlog is in line with seasonal trends for our fiscal Q3," said Chairman and CEO Chuck Swoboda. "Longer term, we remain focused on driving adoption through innovation, and with our broad understanding of the technology levers from materials through systems, we see opportunities to move the market even faster than what has been experienced to date." Of course, with the stock busting through its 52-week high and trading at a plus-20 forward P/E, much of that optimism might already be baked into the price.

Interested in more info on Cree? Add it to your watchlist.


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