Cree, Inc. September Quarter Revenue Below Consensus

According to Sterne Agee, Cree, Inc.

reported September quarter revenue of $268 million below consensus of $278 million as a result of weaker than expected backlighting revenue, greater than anticipated European seasonality, and delays in China streetlighting. “December quarter revenue guidance was also below consensus as a result of lower than expected LED component growth and continuing weakness in backlighting,” Sterne Agee writes. However, Sterne Agee says that the September quarter gross margin of 49% and December quarter gross margin guidance of 48% are still within Cree's long-term targets of mid- to upper-40s, which suggests pricing in general lighting has remained relatively stable. “Nevertheless,” Sterne Agee adds, “the real question is what will happen to gross margins 6-9 months from now Revised fiscal 2011 CAPEX guidance of $250-$260 million (down from the previous target of $300 million), ongoing yield improvements, and the transition from 100 mm to 150 mm wafers, should help Cree maintain its long-term gross and operating margin targets. Cree, Inc. currently trades for $53.00.