Cree, Inc. (CREE): There’s Plenty of Room Left for This Stock to Advance

At this time next year, investors will be looking forward to the June 2015 expectations when determining what they will pay for the stock. If estimates continue to increase by 40% annually (and Cree, Inc. (NASDAQ:CREE) certainly has plenty of room for this type of growth in the light bulb market), the 2015 earnings estimate should be around $2.60 per share.

Assuming a PE of 40 (which is reasonable for a high-growth company like Cree), the stock price has a very good shot at eclipsing $100 per share. That’s roughly a 60% increase from the current price point — and still a conservative estimate given Cree’s earnings potential.

Isolating the LED investment

Cree appears to have a leg-up on other LED lighting companies, given favorable reviews of the company’s high quality warm white bulbs. But, the company does face some competition from Philips Electronics as well as General Electric Company (NYSE:GE).

Both General Electric Company (NYSE:GE) and Philips have a wide portfolio of energy efficient LED bulbs along with compact fluorescent (CFD) offerings. But, from an investment standpoint, neither of these companies allow us as investors to benefit specifically from the transition to LED lighting.

Philips, as a company, focuses on three different sectors: Healthcare, lighting, and consumer lifestyle. Lighting only makes up 34% of the company’s total revenue, so, even if Philips grows the lighting business substantially over the next two years, the gains will be diluted by performance in the company’s healthcare and consumer lifestyle divisions.

Similarly, General Electric Company (NYSE:GE) is a strong innovator in the LED light category, but the division only makes up a fraction of the total. the company’s lighting business is a portion of the “Home & Business Solutions” segment, which made up $8 billion of the company’s $147.3 billion in total revenue.

In order to profit directly from the accelerated growth in LED lighting, Cree remains the strongest choice given the quality of the company’s new technology, a strong distribution partner, and most importantly, its exclusive focus on lighting.

Conclusion

Cree, Inc. (NASDAQ:CREE) is pioneering a new product that is very likely to take over the light bulb industry as we know it. I expect that the company’s ever-developing technology will continue to push the stock higher for years to come, and investors who are along for the ride should capture some tremendous returns.

Don’t let this growth stock rally another 80% before adding it to your portfolio. Pick up shares of Cree today so you can participate in the growth!

Cree, Inc. (CREE): There’s Plenty of Room Left for This Stock to Advance

Published on June 12, 2013 at 9:19 am by The Motley Fool in News

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