Wednesday, March 23, 2011

Cree Disappoints Again!





Cree $CREE , the market leader in LED lighting , updated the market with guidance and it wasn’t pretty. The stock was previously featured in an article here which discussed the company’s issues at length. Earnings View has also featured LED equipment manufacturer VEECO $VECO in an article found here  and essentially the forces causing their stock price downturns have continued.

Returning to the CREE update-and referencing earlier work- the updated Q3 guidance is as follows
  • Updated Q3 revenue guidance of $215-220m vs. previous guidance of $245-265m
  • Note that the previous guidance had been lower than analyst estimates of $288m for Q3
  • Gross Margins now forecast at 43%

So, again, Cree has disappointed the market. It is clearly taking longer for customers to run down inventory although the company is making more positive noises about Q4. Shares in SemiLEDS $LEDS are also down in sympathy.
Frankly, this is justified because the pricing pressures and inventory issues are being discussed by the whole industry. The bottom does not appear to be in sight yet and the stock price falls are a salutary reminder of what can happen when the most optimistic of sales forecasts start to falter.