Shares of LED maker Cree (WOLF 5.55%) were sent packing last month after the company's guidance for the ongoing quarter fell behind consensus estimates. Cree's management has been concentrating on capturing more market for its LED products, a space where bigger players such as General Electric and Koninklijke Philips (PHG 1.69%) also operate.

As a result, it is quite natural for Cree to step up its marketing efforts, but unfortunately, the Street doesn't seem to be recognizing this. Analysts put their earnings expectations for the ongoing quarter at $0.44 per share, but Cree's management guided in the range of $0.36-$0.41 per share. This might seem like quite a big miss, but long-term investors need not worry.

Looking beyond the drop
Cree will be aggressively promoting its LED bulb and is also looking to take advantage of the Energy Star qualification that it recently earned. The Energy Star badge means that Cree's bulbs now qualify for utility rebates through certain local utilities; hence, it is a good move on the company's part to promote this fact. As such, Cree's non-GAAP operating expense is expected to increase around $5.5 million in the current quarter, leading to a bottom line miss. 

Aggressive marketing moves should add momentum to Cree's already flourishing business. Its quarterly results weren't bad at all, as revenue grew 24% from the prior-year period while net income spiked 89%. But to remain competitive, Cree will have to keep churning out innovative products and also undertake efforts to make the public aware about them. And it seems to be progressing well on both counts.

Making the right moves
Cree has been seeing good order momentum for the past few quarters and the trend continued in the previous one as well. The company is expecting growth across all its business segments in the present quarter. Management believes that the company is in a great position to take advantage of the growing popularity of LED lighting and it certainly has the right products to tap this market.

For instance, Cree's 40-watt replacement LED light bulb, which costs $9.97, undercuts General Electric's offering. What's more, Cree's bulb is more efficient as it delivers the same 450 lumens as GE's light, but consumes 50% lesser electricity. Also, as mentioned earlier, the Energy Star qualification could help spur adoption of Cree's products further.

A big market to tap
Another fact that could aid Cree's growth is the possible ban on traditional 40- and 60-watt bulbs. Last year, the government had banned 100-watt incandescent bulbs, and according to USA Today, a similar fate now awaits the smaller sizes. Cree offers a 10-year guarantee on its bulbs that could last as long as 22 years, apart from saving electricity. This could help the company grab more share in a market that's expected to be worth $94 billion by 2020, according to McKinsey.

Also, a recent Department of Energy report states that LED lighting currently accounts for less than 1% of all U.S. sockets. So, it can be said that the opportunity here is huge and Cree is doing the right thing by stepping on the gas to promote its products.

An important partnership
Cree's tie-up with Home Depot (HD 0.94%) has proved to be a success as its sales are increasing due to the home-improvement retailer's wide reach. Home Depot has close to 2,300 stores across 50 states and it has seen good growth in same-store sales of late. In the recently reported third quarter, Home Depot saw an impressive 7.4% jump in same-store sales. Looking forward, Home Depot management is quite optimistic on the back of the housing market and it increased its sales and earnings growth expectations for 2013.

Cree's LED bulb won the 2013 Innovation Award at Home Depot last month and the home-improvement retailer is quite impressed by how Cree's offerings have been doing. According to Home Depot management, the Cree TrueWhite bulb "gives out some of the best natural color when compared to other LED bulbs in the market." Hence, Cree is finding good traction through Home Depot. 

A strong distribution network, an impressive product portfolio, and stronger marketing should help Cree bolster its standing in a market where the likes of GE and Philips are present. Philips has been working on a prototype LED light that it unveiled earlier this year. According to Philips, this would be the world's most energy-efficient light and is expected to be launched by 2015 at a competitive price. In addition, Philips is promising that this LED light will consume half the energy of the leading LEDs in the market. 

The bottom line
It is imperative for Cree to step up its game on all fronts going forward and it seems to be doing the same. The recent guidance might have disappointed investors and analysts, but the fact is that Cree is spending on brand awareness and this could turn out to be advantageous in the long run. There is sizable opportunity in the LED lighting market and Cree is a good way to benefit from this growth.