LED producers look interesting again

By Chris Lau for Kapitall.

After falling 30% percent from its yearly high, Cree (CREE) may be about to turn around. The company, which makes LED lighting, bottomed at $40 and moved up again after Oppenheimer upgraded the stock. The investment house thinks Cree is worth $59.

Cree transition complete

Operating first as a supplier of LED solutions, Cree ignited this industry by making acquisitions that would move the company more closely to end users. The firm supplies LED light bulbs to customers through Home Depot (HD). If LED gains wider acceptance from consumers, revenue could soar.

Cree could be takeover target

To accelerate development of LED solutions, Phillips merged its component unit, Lumileds, with its automotive lighting business. The move by Phillips could mean an eventual merger between the unit and Cree.

Weak quarter could be temporary

Since reporting weak Q3 earnings, Cree’s shares bottomed in April 2014. The firm earned $0.39 per share on revenue of $405 million. Earnings exceeded consensus, but revenue missed expectations. The current quarter will be weaker than analyst expectations. Cree expects Q4 revenue will be $430 million – $460 million. Earnings will be as low as $0.38 per share. At the time, analysts expected Q4 will be $0.44 per share.

Better results from Cree will take several quarters to play out. The company’s near term weakness does not mean revenue growth will be sluggish forever. Adoption of LED by consumers will need more support from sales staff and advertising. As awareness for LED lighting grows, so will sales.

Alternative Investments

Tokyo Electron Ltd. (OTC:TOELY) and Vishay Intertechnology (VSH) are two alternative investments. The former sells semiconductor production equipment (“SPE”) and flat panel display (“FPD”) production equipment.

With Cree shares underperforming, investors might get a better return from the company as its prospects improve throughout the course of the year.

 

Do you think companies in this sector are emerging from darkness into light? Use the links below to start your own research.

Click on the interactive chart to view data over time. 

 

1. Cree, Inc. ( CREE, Earnings, Analysts, Financials): Develops and manufactures light emitting diode (LED) products, silicon carbide (SiC) and gallium nitride (GaN) material products, and power and radio frequency (RF) products. Market cap at $7.38B, most recent closing price at $61.06.

 

 

2. The Home Depot, Inc. ( HD, Earnings, Analysts, Financials): Operates as a home improvement retailer. Market cap at $109.64B, most recent closing price at $77.87.

 

 

3. Vishay Intertechnology Inc. ( VSH, Earnings, Analysts, Financials): Vishay Intertechnology, Inc. manufactures and supplies semiconductors and passive electronic components in the United States, Europe, and Asia. Market cap at $2.04B, most recent closing price at $13.86.

 

 

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

More from Stocks

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says