Uerkwitz wrote, “The good news for CREE: its Lighting segment keeps doing well. Its strategy to build brand and product breadth is working. The bad news: high-power LEDs have fallen out of favor (four consecutive quarters of rev. decline). The worse news: we are unsure when we’ll find a bottom. The worst news: the chip business is getting all the attention and overshadowing the success CREE has elsewhere. Near term, the mix shift toward Lighting is hurting gross margin and the company still needs a few more quarters to start seeing material leverage from this fast-growing segment. Until we get more clarity on the chip side, we’ll sit sidelined. It’s worth noting CREE has $9 of cash per share.”
The bottom line, “the company has executed lighting strategy well, but also ran into a buzz saw on the chip side. We remain convinced high-power LEDs have a place in the market and CREE will be the premier provider. However, with visibility at a minimum we are not ready to dip a toe in the water.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Andrew Uerkwitz has a total average return of 8.0% and a 65.7% success rate. Uerkwitz has an -34.0% average return when recommending CREE, and is ranked #681 out of 3337 analysts.