Cree: Zacks’ Bull of the Day Play

Cree, Inc. (CREEFree Report) is cashing in on the Internet of things. This Zacks Rank #1 (Strong Buy) recently beat the Zacks Consensus Estimate for the second quarter in a row.

Cree makes LED lighting systems and bulbs, blue and green LED chips, high-brightness LEDs, lighting-class power LEDs, power-switching devices and RF devices.

Second Beat in a Row

On Jan 24, Cree reported its fiscal second quarter 2017 results and beat on the Zacks Consensus Estimate by a penny. Earnings were $0.09 versus the consensus of $0.08. It was the second consecutive beat in a row.

Its combined revenue, including discontinued operations, was $401 million, an 8% decrease compared to the combined revenue of $436 million in the second quarter of fiscal 2016. But it was an 8% increase over the fiscal first quarter of 2017.

It settled a key patent infringement and false advertising lawsuit with Feit Electric which added to earnings in the quarter.

The company is optimistic about the fiscal year saying, “the fundamentals in our business have improved over the last several quarters, and we remain focused on building a larger and more valuable LED lighting company by bringing better light to our customers.”

Estimates Rise for the Full Year

The analyst was bullish on the company after its conference call as the Zacks Consensus Estimate for the full fiscal year 2017 jumped to $0.41 from $0.15 before the earnings call.

Cree has been in a turnaround mode for several quarters. This is just a continuation down that path.

Is a Breakout Coming?

Cree has been trading in a narrow trading range for months and hasn’t managed to break out to a 1-year high let alone a 2-year high.

But it has picked up momentum in recent months. This recent earnings report also added fuel to the shares.

Cree isn’t cheap though. It’s trading with a forward P/E of 67.6.

You’re buying Cree for its growth story though. Earnings estimates have made a turnaround for 2017. Earnings are now expected to grow 5% this year.

For investors looking for a stock in technology and semiconductors, Cree is one to keep on your short list.

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