More Analyst Reactions To CREE Quarter: Generally Bullish But Future Margins A Concern

Piper Jaffray is out with a bullish call as well following the CREE earnings report and is maintaining its Overweight rating and raising the price target from $70 to $88.  Hat tip to Street Insider for the following analyst comment:

“LED market remains a compelling growth opportunity. The LED market was roughly $6B in 2008 and we expect it to triple to $18B in 2013 (43% CAGR). Growth rates this high in markets this large are rare. We estimate that the general illumination market size for light bulbs of all kinds is roughly $20-$30 billion and fixtures are also roughly $25-$30 billion. Roughly 0.75%-1% of the general illumination market revenue is from LEDs. In addition to the general illumination market, TV backlighting is a significant growth opportunity for LEDs near term.”

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There are concerns though.  In the conference call, the company said that R&D costs would increase so the company could maintain its competitive edge.  It expects R&D and general admin expenses to represent about 25% of revenue, while analysts had expected it to remain around 21% which is what it was last quarter.  So not a huge expected increase in expenses, but it’s a bit more than what analysts had expected and any time you get a stock that has run up like CREE has, traders will take profits on a less than flawless quarter and guidance report.  Merriman Curhan analyst Bill Ong mentioned that analysts had expected margins to contract, just not so soon.

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