When you consider the additional $5.5 million to be spent next quarter on advertising the guidance is pretty close to in-line with expectations. Expect smart money to be buying tomorrow.
I think there is a good chance this opens in the low 60's but closes in the high 60's low 70's. I also like the comment fom Chuck about investing in new products, channels, and the brand. Expect revised guidance when they get in new channels.
The exclusive arrangement with HD lasts one year. So, expect one of two things to happen 1) CREE with additional bulb sales starting in early 2014 due to additional channels (e.g. Target, Lowes,etc) or 2) HD agrees to buy a boat load of bulbs and market on TV, Print, Internet, etc. With the Low price point due to subsidies (energy star) and the exclusive agreement with HD expiring in early 2014 - expect huge growth in bulb sales and increased guidance in EPS. The other beneficial factors will be economies of scale with higher sales and future platforms that reduce costs.
Competition will become a problem but not in the short term. This is going much higher in the short term.
We all know about the energy star qualification - why this is a huge deal. The bulbs will be selling for between $5 and $7 when instant rebates are available. Bulbs have been selling in about 12 Seattle locations for these prices for the last two months. I have been tracking sales for about 6 weeks. They have been selling about 100 40 watt and 60 watt bulbs a day (does not include flood sales or TW series). Why this is important - because 100 X 2500 (HD stores) X 365 days = annual sales approaching 100 million. This equates to only 2% of the US sockets and probably $1.00 in earnings per year. But, the great thing is this doesn't include the floods, future 75 and 100 watts, TW series, on-line sales, or foreign countries. The other big component in getting into different additional sales channels after the one year HD exclusive agreement. One can see how CREE starts selling 200 million or 300 million bulbs a year.
The other big potential catalyst is passing the Shaheen Portman energy efficiency bill - which has great support on both sides - but with congress so dysfunctional who knows.
At some point on bulb sales alone it seems CREE will need to increase guidance.