Cree Inc (CREE) Misses, Issues Weak Guidance, Shares Down AH

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01:48:03 am on January 18, 2012

The LED leader Cree Inc (CREE) continues to have a bit of a tough go in earnings season, missing analyst estimates and issuing weak guidance once again.  The company reported a non GAAP EPS of .25/share on revenues of $304 million.  It wasn’t an awful quarter with the company missing estimates by a small margin and posting quarter over quarter growth of 18%, but traders don’t like the guidance sending shares down nearly 5% in after hours trading.

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CEO Chuck Swoboda acknowledged the LED market remains challenging, but that the company strategy is working.

"Our second quarter results demonstrated the strength in our expanded lighting product line with strong growth in sales of both indoor and outdoor products," stated Chuck Swoboda, Cree chairman and CEO. "While the business environment remains challenging, our results demonstrate that our strategy is working. Our future business outlook remains very optimistic based on our belief that innovation drives payback, payback drives LED lighting adoption and adoption expands the market for both Cree and our customers."

Looking ahead to next quarter, the company is guiding below analyst estimates with an estimated non GAAP EPS of .18 – .25/share on revenues of $290 – $310 million.  That compares with the analyst estimate of .30/share on revenue of $321 million.  The guidance is the reason shares are down after hours.

Technically, shares of CREE remain weak and in a firm downtrend, continuing to trade below the 50 day moving average.  While CREE is a tremendously promising company in a promising industry I don’t see any reason (at least technically) to jump into shares quite yet.

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Firm downtrend, huh? From the opening bell on Jan. 18, which was the first trading session after this article, to the close on Jan. 20 the stock is nearly up 20%. Shows how useful technical analysis is. Maybe this will help:


I probably shouldn’t even waste my time responding to you particularly since you posted anonymously, but .. OK I will. When I posted the earnings summary before trading on the 18th, the stock was still below resistance of the 50dma which is an indication the stock is still in a downtrend. You might reread the post again, but I don’t think I made any predictions about where the stock would move over the next few days. Yes, it appeared traders believe the worst may be over and the stock did clear important resistance of the 50. The stock looks much better, but at the time it was still technically weak. I actually like it for a trade should it return to the 50 after the surge. I’ve said perhaps 1000 times over the past 10 years on my blogs. Technical analysis isn’t a crystal ball, it’s a simple measure of supply/demand which you can learn about in an economics book if you’re so inclined… an no technical analysis is a prediction tool! It gives you an insight into the health of a stock/market and gives you a higher probability of success. On a final note, don’t make the mistake of using movement over a couple days as validating the beginning or end of a long term trend.

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