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What happened?

Shares of Cree (WOLF -0.67%) fell 16% in Aug. 2016, according to data from S&P Global Market Intelligence. This earnings-related plunge effectively erased the gains from a strong July.

So what?

The LED lighting specialist fell just short of Wall Street's fourth-quarter earnings targets despite a solid top-line performance. Cree is no stranger to mixed quarters, but management followed up with disappointing guidance for the next reporting period.

Specifically, the recent sale of power and radio frequency products division Wolfspeed will hurt Cree in the short term. The incoming $850 million cash payment from Wolfspeed buyer Infineon Technologies (IFNNY 2.30%) is hitting the cash flow statement directly, skipping the basic revenue and net income figures. So, the metrics most commonly tracked in headlines and simple analyses will suffer some tough year-over-year comparisons over the next four quarters.

CREE Chart

CREE data by YCharts.

Now what?

Cree soared on the Wolfspeed sale and then plunged right back down for essentially the same reason. Those are the breaks in this crazy market, amplified by Cree's lumpy sales and limited bottom-line visibility.

The stock has taken a 64% haircut over the last three years, but Cree still trades at a princely 59 times trailing earnings and 37 times free cash flows. The stock is priced like a high-octane growth ticker, but business results haven't followed suit lately.

The global lighting market is still shifting away from traditional incandescent bulbs, giving Cree plenty of runway for revenue growth and increased market share. The Wolfspeed cash infusion, which also reduces the amount of non-core distractions facing CEO Chuck Swoboda, should help the company find its feet in a hurry.

But make no mistake -- unless Cree executes to perfection, share prices could plunge much further. Personally, I'm quite happy to stay on the sidelines for now.