(Cree earnings story updated for analyst comment, Wednesday trading)NEW YORK ( TheStreet) -- LED bellwether Cree ( CREE - Get Report) is losing some of its support, and this isn't a direct reference to the heavy selling action on Wednesday, but the shifting Wall Street view of the LED sector darling. More than 13 million Cree shares were traded on Wednesday -- four times its average -- as the LED stock declined by 3%, and hit a new 52-week low during intraday trading at $38.22. The Cree decline carried over from Tuesday's after-hours weak earnings report and guidance that remained short of the Wall Street view for the coming quarter. Long-time bears on the Cree story had said headed into earnings that shorts might still apply more pressure on shares. While the Wednesday decline of 3% was less than the after-hours decline on Tuesday that had peaked at a 7% drop, the more compelling story on Wednesday for Cree bearishness was the frustration on the part of analysts who haven't been long-time Cree bears. "At this point, even bulls are going to pause and really wonder about Cree and question how quickly does the lighting business really take off," Brigantine Advisors and long-time Cree bear Ramesh Misra said on Tuesday. By Wednesday, there were indications this reconsideration of Cree among non-bears was taking place, though the short-term and long-term view of the company remained a point of bifurcation for Wall Street. Jeff Bencik, analyst at Kaufman Brothers, lowered his rating on Cree from a hold to a sell and lowered his price target to $29, a bet that even after Cree's big drop since it pre-reported a weak quarter, there is still 25% downside to shares. "CREE continues to stress that driving current LED adoption levels will be the key to growing revenue and earnings. While this may be true in the long run, we are uncertain about the company's ability in the short run to cut costs as quickly as pricing is declining. The company continues to be a technology leader, but there is still considerable uncertainty surrounding the stock and its end markets," the Kaufman Brothers analyst wrote. Theodore O'Neill, analyst at Wunderlich Securities, reduced his rating on Cree from a buy to a hold, and lowered his price target from $80 to $40. While the Wunderlich analyst doesn't see as much downside in Cree's share price from this level, his commentary on Cree did sound alarm bells about the long-term, secular growth story for LEDs, and for Cree, which has always been taken for granted among the bulls. O'Neill's comments don't discount the chance that in the long-term Cree is still a leader in the space, but he conceded that his call for $3 core earnings from Cree could take a "few extra years to get there." The Wunderlich analyst also evinced the frustration among Cree bull with the Cree management team, writing, "CREE is now a 'show-me' story with no near-term catalysts. The company's gross profit margin peaked in fiscal 4Q10 and is now on track to hit 40%, or 10 percentage points below where it was four quarters ago. Management has offered up in succession: pricing pressure from the backlighting market where it isn't supposed to have much exposure; China street lamp delays; inventory buildup in the channel; and softened demand as reasons for margin declines. Yet at the same time it is claiming to have ever better components. What's next, a tsunami?"
Eric Rosenbaum. >To follow the writer on Twitter, go to Eric Rosenbaum. >To submit a news tip, send an email to: firstname.lastname@example.org.