Cree Inc (CREE) Sinks To 52 Wk Low After Slashing Revenue Guidance 15%

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09:13:52 am on March 23, 2011

Shares of Cree Inc (CREE) are touching new 52 week lows this morning after the company lowered Q3 guidance.  They now see revenue in the range of $215 – $220 million (down from previous estimate of $245 – $265 million) due to lower demand for both chips and other components.  This comes after the company reported disappointing earnings results and guidance in January that was already lower than analyst expectations. 

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CEO Chuck Swoboda says LED component demand is improving post Chinese New Year, but that it has taken longer to work through customer inventories and pricing was lower than expected.  While no mention was made of a downward revision to EPS I think we can assume that a lower EPS is likely as well.

“The LED components business appears to be turning the corner,” stated Chuck Swoboda, Cree’s CEO and chairman. “Despite the challenges we faced in Q3, distributor sell-through has improved and we target solid growth next quarter. Based on our preliminary outlook for Q4, we are currently targeting revenue to increase 10 to 12% in fiscal Q4 led by growth in LED components.”

Technically, the area around $47 is an important level of long term support.  There is some room for the stock to run lower intraday, but a close near the lows of the day today with heavy volume would indicate the possibility of more deterioration in the stock, possibly closer to $40 level.  Longer term, I still believe this correction is going to offer a tremendous long term opportunity in an LED leader.  Patience is needed for now though.

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