Cree (CREE) Deal with Home Depot a Positive; LED Bulb Prices Near Inflection Point - UBS

March 6, 2013 11:55 AM EST
Get Alerts CREE Hot Sheet
Price: $27.49 -2%

Rating Summary:
    12 Buy, 23 Hold, 5 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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UBS boosted estimates and its price target on Cree (NASDAQ: CREE) from $45 to $51 after a deal with Home Depot (NYSE: HD) to sell two high quality and disruptively priced 40W and 60W LED bulbs for the residential consumer market. However, the firm stopped short of upgrading the stock and is keeping its Neutral rating.

"Cree priced its new 40W LED bulb under $10 and its new 60W LED bulb for $13-$14 versus average industry prices near $20," the analyst notes. "We estimate Cree’s prices lower the residential LED ROI payback period to 2-3 years versus 4-5 years previously."

The firm said the deal with Home Depot is nearing a positive inflection point as it gets Cree's products using its own brand on a major retail store shelf. "We estimate Cree's sales from Home Depot will be neutral to gross margin for now, as Cree maintained its Mar-13 gross margin guidance of 39.5%. We also note Cree is using its high powered LED chips for residential LED bulbs which could mean less competition from chipmakers in China which have lower power/priced LED chips."

The firm raised FY13, FY14 and FY15 EPS estimates to $1.35, $2.13, and $2.66 versus $1.30 and $2.00 and $2.40 previously.

For an analyst ratings summary and ratings history on Cree click here. For more ratings news on Cree click here.

Shares of Cree closed at $51.16 yesterday.

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