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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Fool contributor Travis Hoium 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.