Cree (NASDAQ: CREE) designs and produces semiconductor products for power and radio-frequency (RF) applications and lighting-class light-emitting diode (LED) products, used across a whole variety of applications.
A] Estimating Total Revenue
- Cree’s Total Revenue has grown from $770 million in 2017, to $1.08 billion in 2019, on the back of strong growth in Wolfspeed segment revenues.
- The Wolfspeed segment manufactures Power and RF products, used across a variety of applications such as transportation, inverters, and wireless communication systems.
- We expect revenue from this segment to grow from $540 million in 2019 to $1.08 billion in 2021, a 2x increase, on the back of growing demand from the electric vehicle market and the advent of 5G communication.
- We expect this growth to drive Total Revenue to $1.31 billion by 2020, and subsequently to $1.71 billion in 2021, which is a 58% jump from 2019 levels.
You can view our interactive dashboard analysis – Cree Valuation: Expensive or Cheap?
B] Estimating Net Income
- Net Loss has grown from $98.13 million in 2017 to $375.08 million in 2019, but we expect things to get better by 2021.
- Of the $375 million loss in 2019, $317 million comes from discontinued operations. Similarly $263 million from the $280 million net loss in 2018, has come from discontinued operations.
- Finally, with the divested lighting business sold to IDEAL industries, and the rapid growth in Wolfspeed revenue, we expect Cree to turn profitable by 2021.
- We expect net income to rise to around $204 million by 2021, on the back of higher margins for Cree’s products.
C] Estimating Earnings Per Share
D] Estimating P/E Multiple
- The forward P/E for the semiconductor industry stands at 26.87x.
- However, with the divestment of the under-performing lighting products segment, and a rapid expected growth in revenue and margins driven by Wolfspeed, we have a slightly higher P/E estimate of 27.5x for Cree’s stock.
Trefis has a price estimate of $53.35 per share for Cree’s stock, about a 10% upside from its current market price of around $48 per share.
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Data
Like our charts? Explore example interactive dashboards and create your own.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.