Thursday, August 15, 2013

Investopedia: Expectations, Not Performance, Eclipse Cree

It's pretty rare for a company at the leading edge of an emerging technology to have a smooth growth trajectory, and LED leader Cree (Nasdaq:CREE) has certainly had a few wobbles over the years. That said, Cree has established itself as one of the “Big Five” LED chip companies, one of the three major integrated LED lighting companies, and a leader in patents and technologies. Couple that with a greater than 10-year run of positive free cash flow and it's not hard to see why Cree is a go-to name for growth investors.

That popularity comes with a cost, though. It's exceedingly rare to see a company's stock rise more than 150% in 12 months and still have modest expectations and/or an undemanding valuation attached. Given that margins are a pressing concern with Cree and the company's guidance for the next quarter looked light, it's not too surprising to see the shares indicated down in pre-market trading.

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