This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Green Energy Losers: LED Bellwether Cree

NEW YORK ( TheStreet) -- Cree (CREE - Get Report) is leading the LED lighting sector down on Wednesday after revealing that an inventory backlog is taking longer to work through than the company expected while at the same time pricing has deteriorated.

The trends forced Cree to revise its previous quarterly top line and gross margin guidance lower.

Cree now expects third-quarter fiscal 2011 revenue of $215 million to $220 million, versus a previous guidance range of $245 million to $265 million. Gross margin guidance was lowered to 43% from 46%.

Cree shares hit a new 52-week low on Wednesday, down 10% and below the $44 mark. Cree's trading volume already had surpassed its average daily volume of 3.4 million shares within an hour of the market open.

The weak market outlook from Cree has been a risk for investors since its last earnings report. Cree first reported the inventory glut during its last quarterly earnings, and at that time analysts covering Cree said timing an inventory work-through isn't a perfect science. There was always the chance that the inventory glut would last longer than Cree predicted. In addition, an inventory glut can put pressure on pricing in the market, as companies move to unload inventory at ever-lower prices.

Cree reported on Wednesday that its LED component business and LED chip business were both facing pricing declines and weaker demand.

Cree remained optimistic in its commentary about the Chinese street lamp market, a key growth driver upon which short-term bullish Cree models have been predicated.

"The LED components business appears to be turning the corner," Chuck Swoboda, Cree CEO, stated in a press release. "Despite the challenges we faced in Q3, distributor sell-through has improved and we target solid growth next quarter."

Investors in the LED space, though, aren't always patient. Cree bears have long maintained that the LED market will rapidly commoditize, and Cree doesn't deserve a premium valuation as an onslaught of low-cost Asian LED supply comes online and as China seeks to keep more of its domestic business, including street lamps, for the rapidly growing ranks of domestic LED players.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AIXG $6.44 -0.46%
CREE $25.85 -2.34%
LEDS $0.44 -2.67%
RBCN $1.38 -0.72%
VECO $22.71 -1.43%

Markets

Chart of I:DJI
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASDAQ 4,683.9190 -49.5780 -1.05%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs