Market Overview

Cree 'Picking Up Momentum' After M&A Deal, Goldman Sachs Upgrades From Sell

Cree 'Picking Up Momentum' After M&A Deal, Goldman Sachs Upgrades From Sell
Related CREE
38 Stocks Moving In Friday's Mid-Day Session
Benzinga's Top Upgrades, Downgrades For November 30, 2018

The case for selling Cree, Inc. (NASDAQ: CREE)'s stock no longer applies as the manufacturer of lighting products is "picking up momentum," according to Goldman Sachs.

The Analyst

Goldman Sachs' Brian Lee upgraded Cree's stock rating from Sell to Neutral with a 12-month price target raised from $19 to $39.

The Thesis

Cree on Tuesday acquired  most of Infineon's Radio Frequency Power Business for more than $400 million in a deal which signals management's transformation is moving faster than previously expected, Lee said in a note. The acquisition is expected to add 25 percent to Cree's out-year EPS, but perhaps more notably, the company will gain more than 70 engineers from Infineon along with various intellectual properties as part of the deal.

Since being included in Goldman Sachs' "Americas Sell List," shares of Cree gained more than 50 percent versus a 30 percent gain in the S&P 500 index, the analyst said. The underperformance in the analyst's bearish stance was attributed to the company shifted from a historical LED and Lighting company to a higher-growth SiC market.

Price Action

Cree's stock is trading at a multiple seven turns above Cree's 10-year average, Lee said, but it's also somewhat inline with its 15 times to 22 times range the stock traded at in 2007 and 2013 when expectations of secular growth were high. As such, investors are encouraged not to be "chasing" the stock at current levels but the potential to become more constructive on the stock is more apparent now than it has been in the past.

Shares traded higher by 2.6 percent Wednesday to $42.88.

Related Links:

Cree Holds First Earnings Call With New CEO

Soft Lighting: Demand Issues Highlighted In Cree's Earnings, Mixed Guidance

Latest Ratings for CREE

Nov 2018JP MorganDowngradesNeutralUnderweight
Nov 2018BMO CapitalInitiates Coverage OnOutperform
Nov 2018Goldman SachsUpgradesNeutralBuy

View More Analyst Ratings for CREE
View the Latest Analyst Ratings

Posted-In: Brian Lee Goldman Sachs LED lightingAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (CREE)

View Comments and Join the Discussion!

Latest Ratings

EMNMorgan StanleyUpgrades90.0
DERMRaymond JamesUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

The Big Business Of Cereal: Which Company Is Winning The Breakfast Bowl Wars?

Scaramucci Discusses Trump, Tariffs, And Cohn's Departure