UPDATE: Summit Downgrades Cree, Inc. to Hold

In a report published Wednesday morning, Summit Research's Srini Sundararajan downgraded Cree, Inc. CREE from Buy to Hold with a price target of $40. Sundararajan cited the company's inability to create impressive gross margins. He pointed out gross margins are the means by which the market evaluates a company. As the gross margin for a sector of the corporation growing at 42.7% FY14/FY13 is under 30% (and other sectors don't sufficiently supplement it), the GM falls below expectations and thus lead to a negative evaluation. In regards to the future, the report stated, “We are still assuming 21.4% revenue growth in FY15, going from our F2014E $1648M to FY2015 $2000M. Downside risks would be reduced LED adoption in lighting worldwide for any reason, use of mid-power LEDs to do the job of high quality LEDs, and upside might continue from the phasing out of incandescents in multiple countries”.