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Why Cree Stock Crashed 14% After Earnings

By Rich Smith - Apr 29, 2021 at 1:28PM

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Third-quarter 2021 earnings were atrocious -- and Q4 won't be any better.

What happened

Shares of power and radio frequency semiconductor specialist Cree (WOLF -0.52%) are crashing today, down by 13.7% as of 12:45 p.m. EDT, despite the fact that the company exceeded expectations in its fiscal Q3 2021 earnings report last night.

Analysts had forecast that Cree would lose $0.23 per share on sales of $130.2 million in the third quarter. In fact, the company's loss was a bit less than feared -- $0.22 per share -- and its $137.3 million in revenue was a bit more than expected.  

Glowing red stock chart arrow trending down

Image source: Getty Images.

So what

So what has investors so upset with Cree this afternoon? Well, there's the fact that Cree is still losing money, for one thing.

Despite growing sales 21% year over year in Q3, the company still ended up losing money -- and actually, a lot more money than the $0.22 "pro forma" loss would suggest. As it turns out, when calculated according to generally accepted accounting principles (GAAP), Cree lost $0.59 per share for the quarter, which was worse than the $0.52 per share lost a year ago.  

Now what

And you can expect those losses to continue. Although CEO Gregg Lowe reassured investors that Cree is "building solid momentum" and "delivering strong top line performance" as it exits the LED lighting business and turns its focus to making more traditional semiconductors used in technology products, the company's guidance for the current fiscal Q4 2021 was not encouraging.

Sales are still going up. Management forecasts $142 million to $148 million in revenue in Q4, which is better than the $138.4 million that Wall Street wants to see. But profits will remain elusive. In fact, instead of the $0.21-per-share pro forma loss Wall Street is projecting, Cree says it will lose between $0.22 and $0.26 per share this quarter, pro forma, and expects a GAAP loss between $0.59 and $0.63 per share.  

No wonder investors are upset.

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