Cree (CREE) Earnings Preview
Cree (CREE) reporting earnings tonight after the close with the Street looking for a $0.23 loss on $130.2M in revenues. The FY is being guided to an $0.88 loss on $614.63M in sales. Shares have closed lower in six of the last seven but did finish green last quarter. The average closing move is 5.65% and max move was 15.85%. The current implied move is 6.85%. CREE has seen a lot of bull flows lately including buyers last Friday in the May $135 calls over 2750X, the May $115 calls, and June $120 calls. The December $90 and $95 puts have also been sold to open recently. On the chart, a strong setup with shares flagging under $125 and then recent highs with a weekly breakout targeting $160. The $12.27B company trades 18.5X sales and 12.66X cash. CREE is a leader in SiC which gives them exposure to growth in EVs while their GaN business has exposure to growth in 5G and industrial markets. The company was at the Roth virtual conference in mid-March and noted increased demand for their GaN products: “the silicon to gallium nitride transition is as strong as it’s ever been. I mean you’ll hear from different companies. I think latest report I read had the GaN adoption at 85% by 2025. So that’s not only for the communications infrastructure business, but also the A&D, airspace and defense part of the business. GaN demand is very, very strong. I think technology itself is on a no-return adoption path.” Analysts have an average target for shares of $111 with a Street High $160. New Street started coverage on 3/29 with a Buy and $120 target expecting the power semiconductor market to more than triple over the next decade, driven by the ramp of electric vehicles and renewables. Cowen upgraded shares in February to Outperform as the company remains well capitalized on solving the bandwidth and cost challenges facing the implementation of 5G and electric vehicles. Short interest is 9.8% and down from around 12% in January. Hedge fund ownership fell 8.5% in Q4. Insiders active in March with a director buying $105k in stock at $105.77.