RESEARCH TRIANGLE PARK – One analyst downgrades, another maintains its "hold," and Cree’s stock still takes a 12 percent stumble in price Wednesday.
Such is the life for executives, employees and stock holders in Cree (Nasdaq: ) these days as its shares rise and fall amidst rumors about a possible takeover by giant GE.
Cree Chief Executive Officer Chuck Swoboda nearly got caught up in the day-to-day tussle as a Bloomberg news reporter caught up with him for an interview in San Francisco.
Asked about an analyst’s comments that the company’s earnings will take a hit when they are announced October 18 and about the GE rumors, Swoboda declined comment other than to say “The results will speak for themselves.”
However, he was more candid when asked about prospects for growth in the light-emitting diode sector – especially in conversion from conventional lighting to LEDs.
"We don’t see why the majority of lighting applications won’t convert,” Swoboda told Bloomberg. "I don’t see any barriers that can’t be overcome.”
Swoboda’s comment on conversion to LEDs, which last longer and consume less power than other forms of lighting, ran counter to analyst Jed Dorsheimer at Canaccord. He cut his rating on Cree stock to “sell” from “hold” on Wednesday. His report triggered a 12-percent drop in Cree stock to $28.97. Shares actually hit a low of $28.10 during the day.
"After two weeks of intensive meetings throughout Japan, Taiwan, and China with companies throughout the LED supply chain, we conclude that Cree will miss December expectations and that signs of a near-term crack will be evident in its September results," Dorsheimer wrote, according to the Associated Press.
He also said rumors that GE, a lighting power itself, might buy Cree were “false,” Bloomberg noted.
The GE talk had triggered a 30-percent plus run up in Cree stock in recent weeks to a 52-week high of $34.87 on September 21.
Cree’s stock has been on a relentless climb since late last year, driving upward from a 52-week low of $15.25. The stock began 2007 at $17.10.
Dorsheimer is not the first to warn that Cree’s stock is overpriced. On September 25, Morgan Keegan downgraded Cree to “market perform” from “outperform,” saying the GE rumors had “driven an unsustainable run” up in the stock.
The growing acceptance as LED lighting as an alternative to other bulbs with countries such as China embracing the technology has helped fuel interest in Cree. And not everyone is abandoning Cree even if the GE rumor isn’t true.
Bloomberg noted that American Technology Research analyst Andrew Huang had reiterated his “buy” recommendation.
"Cree has the best product in the marketplace today and demand for LEDs is strong,” Huang told Bloomberg.