“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, February 25, 2019

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy


"Trading Capital Management"

Option Trade – Cree, Inc. (NASDAQ: CREE) Calls

Monday, February 25, 2019

** OPTION TRADE: Buy the CREE JUN 21 2019 55.000 CALL at approximately $3.20. Place a pre-determined sell at $6.40.

Also include a protective stop loss of $1.30.

Cree, Inc. (NASDAQ: CREE), a manufacturer of LEDs and semiconductors that enhance the value of solid-state lighting, power and communications products, has experienced gains of 21.2% in the past three months to top its broader industry’s 13% climb.

Analysts expect Cree’s current fiscal year earnings, which ends in June, to skyrocket 310%. That growth is expected to continue to the tune of another 63% in the following year. Current estimates also see Cree’s revenue growth in these years reaching 10% and 11%, respectively, which means the company might not see the pullback some on Wall Street expect other semiconductors to witness in the near future.

Over the past three months, Consensus Estimate for CREE's full-year earnings has moved solidly higher. This means that analyst sentiment is stronger and the stock's earnings outlook is improving.

About CREE…..

Cree, Inc provides lighting-class light emitting diode (LED), lighting, and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, South Korea, Japan, Malaysia, Taiwan, and internationally. It operates in three segments: Wolfspeed, LED Products, and Lighting Products.

Past Performance…..

Cree last released its quarterly earnings results on Wednesday, January 30th. The LED producer reported $0.23 EPS for the quarter, beating the consensus estimate of $0.17 by $0.06. Cree had a negative net margin of 18.11% and a positive return on equity of 0.90%.

The business had revenue of $413.04 million for the quarter, compared to the consensus estimate of $408.75 million. During the same period in the prior year, the company posted ($0.01) earnings per share. Cree’s revenue was up 12.3% compared to the same quarter last year. On average, research analysts anticipate that Cree will post 0.37 EPS for the current fiscal year.

Influencing Factors…..

Chip stocks are likely to move significantly higher when a China deal is announced due to the relationship that so many names have with that region and country specifically. 

Also, a big buyer, Artisian Partners filed a 13G with the SEC stating that they control 8.1M shares of CREE.  Also, in an early January filing saw Vanguard announce a 10.4M share position.

Cree has decent short-term momentum, and it is seeing solid activity on the earnings estimate revision front as well. In the past 30 days, four estimates have gone higher for Cree while one have gone lower in the same time period. The trend has been pretty favorable too, with estimates increasing from 14 cents a share 30 days ago, to 16 cents today, a move of 14.3%.

As well, Cree's current year figures are also looking quite promising, with six estimates moving higher in the past month, compared to none lower. The consensus estimate trend has also seen a boost for this time frame, increasing from 73 cents per share 30 days ago to 78 cents per share now, an increase of 6.8%.

Analysts Opinions

Cree was upgraded by analysts at BidaskClub from a “buy” rating to a “strong-buy” rating in a research note issued to investors on Tuesday, January 29th.

Also, Oppenheimer lifted their target price on shares of Cree from $53.00 to $59.00 and gave the company an “outperform” rating in a research report on Thursday, January 31st.

Several equities analysts have recently commented on the company…..

  • TheStreet raised shares of Cree from a “c” rating to a “b-” rating in a research note on Wednesday, January 9th.
  • ValuEngine upgraded Cree from a “buy” rating to a “strong-buy” rating in a report on Tuesday, November 13th.
  • Finally, BMO Capital Markets started coverage on Cree in a report on Monday, November 12th. They issued an “outperform” rating and a $55.00 target price on the stock.

One equities research analyst has rated the stock with a sell rating, eight have given a hold rating, seven have issued a buy rating and two have given a strong buy rating to the company. The stock presently has an average rating of Buy.


CREE has a 52 week low of $33.72 and a 52 week high of $52.88. The firm has a market capitalization of $5.42 billion, a P/E ratio of -350.13, and a price-to-earnings-growth ratio of 7.15 and a beta of 0.60. The company has a current ratio of 4.33, a quick ratio of 3.27 and a debt-to-equity ratio of 0.21.