Cree Inc (CREE) Downgraded By Kaufman On Valuation

Kaufman Bros. is downgrading CREE from Buy to Hold based on valuation.

Hat tip to for the following analyst comment:

“Given the optimism in the market, we would not be surprised to see Cree shares climb higher, but the stock has reached our target and we would recommend investors remain on the sidelines until the shares present a better buying opportunity. CREE shares are now trading at 4x tangible book and 48x our calendar 2010 GAAP EPS estimate of $0.75. At this level, it is trading at a PEG ratio of more than 2. We feel it will take several years before the company reaches $1 billion of revenue (a major milestone) and even then it would be unlikely to earn $1.00 in GAAP EPS (8% net income and 89 million shares outstanding), thus we are hard pressed to see justification for chasing this stock above current levels. Assuming we could imagine it earning $1.00 per share sometime in 2013, it would seem unlikely that investors would place a 36x multiple on that future earning.”

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