Cree: Betting On “The Light Emitting Diode Revolution”

Andrew Huang, an analyst at American Technology Research, Friday morning launched coverage of Cree Inc. (CREE) with a Buy rating and an ambitious $50 price target.

Huang is making a big concept bet here: he sees Cree as a bet that LED-based lighting (LED stands for light emitting diode) “is the best available” lighting technology in the market today with respect to efficiency, cost, useful life and the environment. “Similar to the trends in solar and ethanol stocks, we believe the LED lighting market will emerge as the next ‘clean energy’ investment trend,” he wrote in a research note.

We believe this story is a long-term, fundamental, secular growth story, with technology that it the proverbial ‘game changer.’

Huang thinks there will be legislation at the federal level this year “to limit the use of incandescent bulbs and eventually to eliminate the use of incandescent bulbs.” Adds Huang: “Once the legislation gains more publicity, investor attention will inevitably focus on ways to monetize this secular growth trend.” Like Cree.

Huang points out in his piece that the stock is not well-liked on the Street; of 12 analysts who follow it, just four rate it Buy or Strong Buy. He also notes that there is a substantial short position in the stock. Friday, though, Huang has given the stock a big boost.

Comments

[David Lentz]

While I admire the attributes of LED lighting as much as the next treehugger, I don't see how they're going to compete with CCFL lighting, which has similar/better lumen production, similar energy savings, and only falls behind on useful life. But CCFLs are much closer to the price of incandescent bulbs than LED lighting is -- when one compares an LED replacement bulb at $30-$50 to a CCFL bulb at $3-$5 (both replacing a $1 incandescent), I just don't see the market for LED lighting yet. The only objection to CCFLs that I know of is the use of mercury in their manufacture, and that has been reduced to a miniscule amount with current manufacturing technologies.

Is there some pending collapse in the prices of LED lighting that I am unaware of?