*** Cree $20~$27 Shares Climb in Wake of Earnings, Outlook
Friday January 16, 3:06 pm ET
By Tiffany Kary
NEW YORK -- Cree Inc. (NasdaqNM:CREE - News)'s shares rose Friday, as analysts said booming sales of mobile phones featuring color displays will light up the company's top and bottom lines in 2004.
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Cree, of Durham, N.C., makes LED, or light-emitting diode, products.
The company said late Thursday that its second-quarter net income grew 45%, mostly because of strong demand from mobile-phone makers. Cree also said it expects to earn 17 cents to 19 cents a share in its third quarter, above Wall Street's prediction of 15 cents.
The company won plaudits from several analysts, who raised their investment ratings on Cree's stock, noting the company's strong backlog in orders, decreased competition and a series of new products. One firm, CIBC World Markets, maintained its "overweight" rating on the shares, but lifted its 12- month price target 46% to $41 from $28.
"We recommend aggressive accumulation of Cree shares at current prices given what we believe will be a dramatic revaluation," CIBC analyst Dale Pfau said in a research note.
Mr. Pfau noted that Cree isn't experiencing much pricing pressure outside of China and Taiwan, and that within Taiwan customers increasingly are choosing Cree products over those from local suppliers. He also said the company's four new product families, launched in the past four months, have done well.
Mr. Pfau revised his profit projection for fiscal years 2004 and 2005 to well above Wall Street's current consensus. Mr. Pfau said he expects Cree will earn 71 cents a share in fiscal 2004, versus the consensus of 65 cents, as published by Thomson First Call (News - Websites) . The analyst said he expects the company to earn $1.14 a share in fiscal 2005 compared with Thomson First Call's estimate of 85 cents.
Mr. Pfau owns shares of Cree, and CIBC intends to seek investment-banking business with the company in the next three months.
Other analysts also raised projections for the full year, many citing comments about a robust backlog of orders made by Cree Chief Executive Charles Swoboda during a conference call Thursday. Mr. Swoboda said more than 70% of revenue projected for the third quarter ending in March already is booked or is under contract.
At about 3 p.m. EST on the Nasdaq Stock Market (News - Websites) , Cree shares were up $4.87, or 23%, to $25.99 on volume of 16.1 million shares. Average daily volume is 1.8 million shares.
Analysts also noted that the company's gross margins and average selling prices have improved.
Friedman Billings Ramsey analyst Chris Versace, who raised his rating on the stock to "market perform" from "underperform" Friday, believes the improved margins and prices are a result of more sales for higher-brightness LEDs. Cree said gross margins for the quarter were 47%, up from the September quarter's 43% .
High-brightness LEDs made up 46% of the company's overall LED revenue in the second quarter, up from 45% in the September quarter, Mr. Versace said. Mr. Versace doesn't own shares, but Friedman Billings Ramsey makes a market in Cree shares. |
