Cree, Inc. (CREE): Lighting the Future With LEDs

LEDs are becoming more widely adopted in lighting applications, and the implications of switching to LED bulbs can result in energy savings of up to 70%. Cree, Inc. (NASDAQ:CREE) is a company well positioned to profit as more and more users make a switch to LEDs.

Strong performance

Cree, Inc. (NASDAQ:CREE) is a multi-billion dollar company with a market cap of over $6 billion.  The company has surprised investors beating consensus estimates in the each of the last three quarters.  With no debt on their books, and a strong cash position the company is in great shape with tremendous upside potential.  The stock has been on fire since the start of 2013, having set new 52-week highs.  Year to date, the stock has more than doubled from its $22.25 low.  Part of the reason for the company’s success is their new LED lightbulbs.

Greater consumer awareness

Cree, Inc. (NASDAQ:CREE) recently announced an LED lightbulb costing $9.97 for a 40W equivalent and $12.97 for a 60W equivalent. The Cree lightbulbs are available exclusively at The Home Depot, Inc. (NYSE:HD) across 2,000 locations in the US. Both versions are currently on backorder, indicating a strong demand for the product. LED lighting is gaining greater consumer awareness with shelf space at one of the major home improvement retailers. The light bulb has received positive reviews in terms of quality, durability and the product comes with a 10 year warranty.

Home Depot: Strong partner

Cree, Inc. (NASDAQ:CREE) has picked a great partner in terms of The Home Depot, Inc. (NYSE:HD), a company that will continue to see increased foot traffic as the company’s success is correlated to the housing recovery.  There is little question that the housing recovery has been on a strong uptrend for the past several years, and will continue. The Home Depot, Inc. (NYSE:HD) has $2.5 billion in cash, and the largest do it yourself home improvement retailer, and an ideal distribution partner for Cree’s revolutionizing products.

Competition: Move over, GE

General Electric Company (NYSE:GE) is a major competitor to Cree, and holds one distinct advantage: their name.  Consumers are familiar with the familiar General Electric Company (NYSE:GE) logo, and have been selling light bulbs much longer than Cree has.  When it comes to price, Cree wins easily, with products as cheap as $10.  A simple search on Home Depot’s website shows that General Electric Company (NYSE:GE) offers a 6 pack of incandescent bulbs for $7.97.  Granted, a 6 pick of light bulbs selling for $8 is cheaper than 1 light bulb selling for $10, but is this really the case?

Savings are real for residential users

A 20,000 LED bulb lifespan has a total cost of ownership of $31.97, while CFL light bulbs will cost $35.50, and while the highly inefficient incandescent bulbs will cost $140.80 for the same lifespan.