Why Cree (CREE) Stock Is Lower In Pre-Market Trading Today

NEW YORK (TheStreet) -- Shares of Cree Inc. (CREE) are down 3.22% to $41.30 in pre-market trading on Monday, following a ratings downgrade to "neutral" from "buy" at Goldman Sachs (GS) .

The firm said it lowered its rating on the company, which develops and manufactures semiconductor materials, as it believes Cree is facing growth and share headwinds in its chip business.

Goldman reduced its price target on the stock to $48 from $60.

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 a few notable strengths, 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, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CREE's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 16.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CREE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.53, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $91.14 million or 49.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.77%.
  • CREE INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CREE INC increased its bottom line by earning $1.01 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($1.86 versus $1.01).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Semiconductors & Semiconductor Equipment industry average, but is greater than that of the S&P 500. The net income increased by 5.7% when compared to the same quarter one year prior, going from $28.24 million to $29.85 million.
  • You can view the full analysis from the report here: CREE Ratings Report

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