Story updated at 10 a.m. to reflect market activity.
Shares of Cree fell 0.2 % to $55.85 in morning trading.
The firm raised its price target for the chipmaker to $70 from $66. Analyst Avinash Kant said Cree's business fundamentals are likely to improve.
"Positioned as a dominate player in the LED general market, we expect strong growth in CREE's business over the next five years as adoption ramps," Kant wrote. "While we do not expect gross margins to improve, we believe a more normal decline in LED pricing and constant cost improvement initiatives should stabilize gross margins. We arrive at our $70 price target (previously $66) by applying a 25x multiple to our newly introduced CY15 EPS estimate of $2.40 and adding $9.61 in net cash per share."
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Separately, TheStreet Ratings team rates CREE INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CREE INC (CREE) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."