Oppenheimer: CREE Pre-Announcement A "Painfully Clarifying Moment"

In a report released yesterday after the market close, Oppenheimer says that for anyone who doubted how much Cree Inc.'s (NASDAQ: CREE) performance was linked to the broader LED market, last week's pre-announcement was a “painfully clarifying moment.”

“But the pre-announcement did little to clarify whether Cree's recent round of difficulties is primarily the result of an industry cyclicality or of a competitive shift that has allowed competitors to take share and pressure Cree's margins,” Oppenheimer writes.

“The trajectory of Cree's stock indicates investors are beginning to favor the latter, bearish theory. But a closer look at Cree's relative gross margin performance suggests Cree's position remains strong and unchanged. As such, we believe the likely cyclical upturn in 2H11 will cause Cree's margins to move back toward the mid-high 40%s.”

Cree closed Monday at $45.26.