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is pulling off a feat on Tuesday, gaining ground in a decidedly down day for the broader markets. The LED lighting company was up more than 2% in the late afternoon, as shares surpassed their average daily volume by more than one million shares. Meanwhile, the tech sector and the Nasdaq posted hefty declines. All the major market indexes were down at levels not seen since August near the end of trading.

Has Cree finally turned the corner after a disastrous late summer/early fall share swoon and two consecutive earnings disappointments?

>>Cree Stock: Buy or Sell?

It's hard to ever say such a thing with a stock that bounces around as much as Cree, and that's in a sector, the LED lighting space, where investor sentiment swings quickly, and can swing on one anonymous report in


. Yet Morgan Keegan analyst Harsh Kumar thinks its onward and upward for Cree stock in the coming year and his upgrade of Cree to a buy on Tuesday could be helping buoy shares of the LED play.

The upgrade, with the analyst's one-year price target rising from $48 to $75, is a big reversal in outlook for Cree. Kumar previously had a buy on Cree when shares were at $17. The last time Cree shares traded as low as $17 was the beginning of 2009. Kumar rode the Cree story until shares of the LED company hit $52 by the end of 2009, when he downgraded the stock. The past year has been an up and down one for Cree, with shares continuing to the $80 mark before heading back down to where they started the year when Morgan Keegan went to a hold on the stock. In fact, for all of the volatile swings in Cree shares, year-to-date the LED stocks is down 1.2%.

The more important performance history could be the one-day performance on Tuesday. Cree recently held a round of meet-and-greets with analysts and investors in North Carolina, and the Morgan Keegan analyst met with the company separately and came away with a positive view of the company. In a nutshell, the Morgan Keegan analyst thinks that all the recent headwinds are turning into tailwinds for Cree.

Two short-term headwinds, in particular, are set to be a thing of the past in Kumar's assessment.

First, there was a major glut in the LCD TV market last summer, leading to a freefall in shares of companies that supply LED backlighting. Cree acknowledged the revenue dip from the LCD TV market, however, Cree bulls noted all along that the TV market is a minor revenue affair for Cree, representing 10% of revenue and an ever-decreasing percentage of revenue. Kumar believes it doesn't matter if the LED backlighting to the TV market is a minor part of the Cree revenue model. What matters is that it was adding "insult to injury" for Cree.

"LCD TVs were 10% of revenue in the June quarter and cut in half in the September quarter, and Cree was already struggling with growth" said Kumar. He thinks that Cree revenue from the LCD TV market will begin to grow again from 5% of revenue with the massive Christmas discounts. "LCD TVs can make a difference when Cree is hurting to make revenues, so if they can get greater steadiness in that market it matters," Kumar added. He said that between Christmas and Chinese New Year in February, he is confident that the inventory in the TV market will be moved. "If people don't buy TVs at these prices, then we can say goodbye to the entire semiconductor and glass industries."

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The other short-term headwind in the past quarter was a slowdown in orders for Chinese street lighting, which no one saw coming and was another "last thing Cree needed" in a tough overall operating environment. The Morgan Keegan analyst said that China just released new standards for street lighting in October and the bidding is picking up again.

Kumar said previously tier 1 companies like Cree and tier 2 and tier 3 producers of Chinese street lighting had been competing, but the difference in reliability led the Chinese government to set new standards, and after the recent pause, the pickup in bidding activity gets Cree "one step closer" to reversing the negative string of two earnings disappointments. The top tier players in the market will now be taking a bigger share of the Chinese street lighting business, the analyst contended.

Kumar noted that the issue for Cree in the past two quarters has been coming up short with its guidance, but he is gaining confidence that it will see an uptick in both the Chinese street lighting and LCD TV markets in the March quarter, and a miss on guidance in December is becoming less likely.

"Cree has done a good job in general delivering on the numbers, and with China opening up and Christmas discounting, I'm hoping for a reasonable number that the Street can get comfortable with," Kumar said.

While Cree bears can still make the case that the long-term opportunity in the general illumination market may not play out as quickly as the bulls believe it will for Cree, Morgan Keegan thinks that with the headwinds removed in the March quarter, and the supply/demand imbalance clearing up by the end of the year, Creed can begin to drive real revenue growth.

"I wasn't pushing the stock at $80, but I'm simply getting back in with the China play," said Kumar.

-- Written by Eric Rosenbaum from New York.

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