Personal Finance

Why Shares of Cree, Inc. Popped 15% Today

Image source: Getty Images.

What happened

Shares of LED maker Cree, Inc. (NASDAQ: CREE) jumped as much as 15.4% on Wednesday after the company reported fiscal second-quarter earnings results. At 12:55 p.m. EST shares had slipped to a 6.7% gain on the day.

So what

Quarterly revenue fell 8% to $401 million in the second quarter, although it was an increase of 8% sequentially. Net income fell from $13 million a year ago to $6 million, or $0.06 per share.

When discontinued operations are removed, revenue was $347 million and topped analysts' expectation for $325 million in revenue. And adjusted for one-time items, the company earned $0.20 per share, beating estimates by $0.04.

On the guidance side, results weren't quite as positive. Continuing operation revenue is expected to be $285 million to $325 million next quarter, compared to an expectation of $320.4 million from Wall Street. And earnings are expected to be between $0.01 and $0.09 per share, versus the $0.07 analysts are expecting.

Now what

While quarterly results topped expectations, they're still showing a decline in the business. And that's troubling long term because Cree can't seem to grow volume enough to offset declining LED prices. And with shares trading at 49 times next fiscal year's earnings estimate, the stock is expensive relative to the company's performance. An earnings beat may be exciting investors on Wednesday, but the excitement may not last if Cree can't begin growing on the top and bottom lines.

10 stocks we like better than Cree

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Cree wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More