Cree, Inc.'s (NASDAQ:CREE): Cree, Inc. provides lighting-class light emitting diode (LED) and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, and internationally. The US$5.6b market-cap posted a loss in its most recent financial year of -US$57.9m and a latest trailing-twelve-month loss of -US$186.7m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is CREE’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for CREE.
Consensus from the 14 Semiconductor analysts is CREE is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$60m in 2023. CREE is therefore projected to breakeven around 3 years from now. In order to meet this breakeven date, I calculated the rate at which CREE must grow year-on-year. It turns out an average annual growth rate of 67% is expected, which is rather optimistic! If this rate turns out to be too aggressive, CREE may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for CREE given that this is a high-level summary, but, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I’d like to point out is that CREE has managed its capital prudently, with debt making up 25% of equity. This means that CREE has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on CREE, so if you are interested in understanding the company at a deeper level, take a look at CREE’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should look at:
- Valuation: What is CREE worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether CREE is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cree’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.