Cree Surges After Receiving Upgrade on Reduced Inventory

Cree Inc., a maker of energy-efficient lighting products, climbed the most in 18 months after Canaccord Genuity Inc. raised its price target on reduced concerns about inventories and competition.

Cree rose $4.04, or 14 percent, to $33.53 as of 10:22 a.m. in Nasdaq Stock Exchange trading. Earlier the shares reached as high as $34.50, the biggest intra-day gain since January 2010.

Jonathan Dorsheimer, a Canaccord analyst in Boston, raised today his 12-month price target to $39 from $37 and upgraded the shares to “buy” from “hold.”

“Cree has finally begun to work down its inventory levels,” Dorsheimer said in a note to clients. “We feel the company has adequately reset expectations while also providing a path to upside.”

Cree’s fiscal fourth quarter net income dropped 63 percent to $19.8 million, or 18 cents a share, the Durham, North Carolina-based company said in a statement after the close of regular U.S. trading yesterday.

For the first quarter, ending in September, Cree forecast profit of $16 million to $19 million, or 14 cents to 17 cents a share, lower than the 18.6-cent average estimate of 10 analysts compiled by Bloomberg.

“Guidance was above what we feel were fairly bearish buy-side expectations,” Dorsheimer said.

The market for high-powered LED lights may favor technology leaders in the industry such as Cree, which will give it an advantage over competitors in Asia, he said. The company’s shares have dropped 49 percent this year.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE