Cree, Inc. (CREE), Rubicon Technology, Inc. (RBCN), GT Advanced Technologies Inc (GTAT): Should You Follow the Analyst or the Company?

GT Advanced Technologies Inc (NASDAQ:GTAT) is a global equipment supplier in the solar, electronics, and LED industries. In 2013, the $800 million company has rallied 120% behind the optimism surrounding solar and speculation of strong LED growth.

GT Advanced Technologies Inc (NASDAQ:GTAT)’s performance on Wednesday wasn’t as noteworthy as Rubicon Technology, Inc. (NASDAQ:RBCN), but that’s because GT is mainly a solar company. During its last quarter, $150.7 million of its $168.3 million in revenue was from polysilicon (solar), and only $6.2 million was from sapphire (LED). Therefore, poor performance in LEDs doesn’t necessarily hurt GT Advanced Technologies Inc (NASDAQ:GTAT).

The problem is that investors anticipate strong growth from this segment, along with sapphire use in smartphones. After such large gains, the market might want to see strong performance from this segment to carry the stock higher. Based on Cree’s guidance, that fundamental performance might not be present.

Final Thoughts

Beneficiaries of the LED space continue to tick higher, but there seems to be some disconnect between fundamental performance and outlook for the industry. In the case of GT Advanced Technologies Inc (NASDAQ:GTAT), not much of its current valuation is tied to LED, but for Rubicon Technology, Inc. (NASDAQ:RBCN) and Cree, Inc. (NASDAQ:CREE), most of their strong annual gains are linked to high expectations for this space.

Hypothetically, investors believe that the long-term cost-savings associated with Cree’s LED bulbs will attract a money cautious consumer, especially with rising electric rates. However, a six-pack of these bulbs can cost between $55 and $75 but may save the consumer $1,800 over a course of 20 years.

Therefore, the question becomes whether or not consumers look far enough into the future and will pay a large price for these bulbs, or would rather pay more over a long period of time? This is a tough question to answer, but with stocks associated with LEDs doubling in the last year, I think investors are taking too much of a one-sided bet.

The article Should You Follow the Analyst or the Company? originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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