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Why Cree's Shares Went Dark Today

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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  • Report this Comment On October 29, 2013, at 4:18 PM, adamjewl wrote:

    The operating expenses had increased to $5.5 million in the first quarter because of advertising expense. It is estimated that revenue will fall in the range of $400 million to $420 million. The company's future will continue to grow in LED fixture and bulbs. I have gone through these facts from:

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