Upon reporting results, shares of CREE were slaughtered, and I bought some at $63.50 or 14% below where they closed. CREE makes energy efficient LED lights, which has been a tremendous growth segment within the $120 billion light industry. LED lighting is gaining popularity, but it still dwarfed by traditional lighting. CREE has made an LED light bulb that looks exactly like a regular one while maintaining its energy advantage. I believe this product will help CREE gain a foothold in the consumer lighting market, which is the majority of the total market. I expect that by 2020, LED lighting will dominate the market because they provide significant energy savings for consumers. Moreover as Asia continues to industrialize, lighting will grow relatively fast. I expect total LED sales to grow to 75% of what will be a $160 billion market, and CREE is perfectly positioned to profit from this growth.
That is why I was actually happy to see these quarterly numbers. I have been wanting to initiate a position in CREE for the past month after I did a deep dive on LED technology and growth prospects. This quarterly report, which did nothing to shake my long term conviction, provides investors who are focused on the long-run an excellent entry point. Frankly in my opinion, the quarter was not that bad at all. The company reported EPS of $0.39 (up 45% YoY) and revenue of $391 million (up 24% YoY), both of which were in line with estimates. At the same time, gross margins of 38.6% showed sequential and annual improvement, though they were a bit less than expected. Importantly, light bulb sales grew exceptionally fast, 37%, which suggests strong adoption of its product.
Now, some investors were disappointed with CREE's guidance. Its revenue midpoint of $410 million was marginally below the $414 million estimated while its EPS guidance was weak due to lower margins at $0.36-$0.41 vs. analyst expectation of $0.44. The biggest risk to CREE is depressed margins as competitors like Ph