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 maker Cree (NASDAQ: CREE ) dropped 17% today after the company reported fiscal-first-quarter earnings.
So what: Quarterly revenue jumped 24% to $391 million, which was about $1 million below estimates. Net income jumped 89% to $30.5 million, or $0.25 per share, and adjusted earnings were $0.39 per share, in line with estimates.
The problem for Cree today was guidance of $400 million-$420 million in revenue and earnings of $0.36-$0.41 per share next quarter. The midpoint was below the $413.8 million estimate from analysts and earnings per share were well below the $0.44 estimate.
Now what: This is the challenge for a company trading at a premium to the market. Even a small slip-up that doesn't seem like a slip-up can send the stock crashing. Estimates are still for great growth from $346 million in revenue last year, so I don't think the long-term thesis has changed today. Investors are just getting in at a better price, which reduces the risk of a crash like this in the future.
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