Analysts Staying On The Sidelines On Cree Until Sales Return To 20% Growth
UBS said in a research note that it's keeping a Sell rating on the shares of Cree, Inc. (NASDAQ: CREE) until total sales growth returns to 20 percent to justify its current premium multiple of 42 times.
Analyst Stephen Chin noted the company's September quarter results were in line with its guidance. Lightning business revenues were down 7 percent sequentially but up 26 percent year-over-year, with lighting margin improving 100 basis points sequentially.
Slowing LED business
While noting that Cree's LED chip sales rose 3 percent year-over-year, UBS said it expects a slowdown, as equipment suppliers see higher orders from Cree's China-based LED competitors.
UBS expects the Wolfspeed sale to close by the end of calendar year 2016. The $585 million proceeds could be used for M&A or returns to shareholders, the firm said.
Citing the weaker December quarter revenues and non-GAAP earnings per share guidance, UBS lowered its 2018 earnings per share estimate to $0.60 from $0.67. The company targets capex of $55 million, free cash flow of $100 million for 2017, the firm noted.
As such, UBS reiterating its Sell rating, while it lowered its price target to $19 from $21.
At time of writing, Cree shares were plunging 13.33 percent to $21.84.
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Latest Ratings for CREE
|Feb 2017||JMP Securities||Downgrades||Market Outperform||Market Perform|
|Dec 2016||JMP Securities||Initiates Coverage On||Market Outperform|
|Oct 2016||Stephens & Co.||Downgrades||Overweight||Equal-Weight|
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