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 Cree, (NASDAQ:CREE) plunged more than 12% Wednesday after the LED specialist turned in mixed fiscal third quarter results.

So what: Quarterly revenue rose 16% year-over-year to $405.3 million, which translated to 17% growth in adjusted net income to $47.7 million, or $0.39 per diluted share. Analysts, on average, were looking for lower earnings of $0.38 per share on higher sales of $407.29 million.

For the current quarter, Cree expects revenue in the range of $430 million to $460 million, with adjusted net income in the range of $0.38 to $0.44 per share. By contrast, analysts were modeling current quarter earnings of $0.44 per share -- at the top end of Cree's guidance -- on sales of $435.09 million.

Now what: To explain the discrepancy between guidance and analysts' expectations for Cree's bottom line, management pointed to margins falling as lighting continues to grow and comprise a larger portion of Cree's overall product mix. Even so, Cree CEO Chuck Swoboda assured they should be able to make cost reductions in the product line to at least partially control this variable as the mix continues to shift.

Still, Cree stock doesn't look particularly cheap, trading around 53 times last year's earnings and 24 times next year's estimates. Keeping in mind those estimates are likely to drift downward as analysts have time to fully digest today's news, I'm perfectly happy waiting on the sidelines for a more attractive entry point going forward.

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Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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