Morgan Keegan Raises Rating on Cree

Analyst Harsh Kumar says the upgrade to outperform from market perform is based on the company's outlook

Cree (CREE ) shares rose after the company reported second-quarter EPS of 17 cents, and sees 17-19 cents in third-quarter EPS. Morgan Keegan upgraded the stock on the news.

Analyst Harsh Kumar tells S&P MarketScope he upgrades to outperform from market perform based on the company's outlook. He cites a strong outlook, ongoing improvement in gross margin stemming from both reduced costs, and average selling prices improvement. He says most of business trends for Cree appear to be positive, driven by favorable growth trends in the handset end market, namely demand for premium LED products for color backlight and keypad lighting.

Also, Kumar believes progress on cost cuts will lead to positive gross margin trends. He raised fiscal year 2004 (June) EPS estimate to 65 cents and fiscal 2005 to 82 cents.

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