Morgan Stanley Previews CREE F3Q11

Morgan Stanley is previewing Cree Inc.'s (NASDAQ: CREE) F3Q11.

“We expect incremental data on one of the 3 pillars of our Underweight rating — lower gross margins,” Morgan Stanley writes. “Cree is scheduled to report F3Q11 (March) earnings on Tuesday, April 19, after the close.

“Management already revised guidance down on March 23, so we don't expect more surprises for the March quarter; we are most focused on gross margin guidance for the June quarter: We forecast 42%, or 100 bp below the most recent guidance for March, but see further downside risk as management has committed to grow the top line after three sequential declines, and may need to cut prices to move more product. Our Underweight thesis on CREE is based on lower ASPs, lower gross margins, and lower market share, which we think will offset strong industry volume growth in LED lighting.”

Cree closed Tuesday at $42.98.