Cree Inc (CREE) Beats On EPS, But Light On Revs & Guidance; Shares Down 10%

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03:29:50 pm on October 19, 2010

Cree Inc (CREE) reported another quarter of strong growth, but it wasn’t enough to appease traders who are still looking for perfect quarters from this LED high flyer.  The company wasn’t able to achieve perfection this time around, reporting mixed results.  They reported a non GAAP EPS of .60/share which beat analyst estimates of .58/share but revenues came in a bit shy of the analyst expectations at $268 million (vs the estimate of $277 million).

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Looking ahead to next quarter, guidance isn’t all that impressive either and likely a big reason why the stock is down 10% in after hours trading.  The company is targeting revenues in the $270 – $280 million range and non GAAP EPS in the range of .56 – .60/share.  That compares to analyst estimates of revenues at $297 million and EPS at .60/share. 

Cree CEO Chuck Swoboda commented on the quarter:  “Q1 was another record quarter for Cree as revenue grew in lighting, LED components and power products.  Although total revenue was on the low end of our target range of $270-280 million due to a decline in LED chips, LED lighting adoption continues to gain momentum and the growth drivers for the company remain on track.”

Technically shares of CREE are headed back to test the lows of this correction below $48 and it’s important that it hold that level to keep this current base intact.  Should it close below the $47.30 level,  there really isn’t any significant support until it gets closer to the $35 level. 

I personally took a chance and purchased a small position ahead of earnings for a longer term position and will wait and see how that $47.30 level holds up over the next few days.  I won’t rule out adding more to my position if it looks like that level will hold.  On that other hand I won’t rule out closing the position for a small loss should the $47.30 level be taken out.  I suppose much of the action from here will be dependent upon what analysts have to say tomorrow morning.  The guidance is a bit disappointing, but the quarter may have been just good enough to keep CREE above $47.  We shall see.

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