Skip to main content

Cree on a roll - rising on rumors or something more substantial?

One of the stocks that showed up on this week's Alert HQ list of BUY signals based on daily data is Cree, Inc. (CREE)

It has a chart that meets the Alert HQ criteria. The stock has been in a steady decline for months and has just popped up over its 50-day moving average. Its DMI is turning positive just as MACD has already done. It appears a reversal to the upside is underway. The 6-month daily chart is below:

Chart of CREE
The stock has recently benefited from a good earnings report. A week ago Cree announced that fourth-quarter profit rose 31 percent as sales of the company's light-emitting diodes drove a 22 percent revenue gain to beat Wall Street expectations. Per share profit rose from $0.08 to $0.09 for the quarter.

For the full fiscal year, Cree reported net income of $33.4 million, or 38 cents per share, down from a profit of $57.3 million, or 72 cents per share, in fiscal 2007. Revenue rose 25 percent to $493.3 million from $394.1 million.

Despite the improvement on a quarterly basis, it can be argued the stock is still expensive. With a PE of 60, a Price/Sales ratio of 4 and a PEG of 2.6 Cree is no bargain at its current price of $22.84. So far, though, the stock has managed to hang onto its gains.

Today on Barron's Tech Trader Daily site, Eric Savitz may have offered a reason. Apparently, there are all kinds of rumors floating around about Cree. One is that IBM might make a bid for the company. Another is that Cree and Korean company LG are planning to set up a joint venture in China, to make LED backlights. According to Andrew Huang, an analyst at American Technology Research, the stories range from "makes no sense" to "unlikely".

In summary, Cree has exceeded Wall Street expectations but still seems a bit expensive. Based on future earnings potential as a prime supplier to many of the leading users of LED backlighting technology, the stock could tack on more gains if the tech sector rallies. Without that kind of rising tide, though, investors may allow the stock to sink back below its 50-day moving average.

As I usually recommend, it's always a good idea to put the Alert HQ stocks on a watch list and see what happens.

Source: Cree: AmTech Says IBM Bid Rumor “Makes No Sense;” Contends Report Of LG Display Venture “Unlikely True”

Disclosure: none

Comments

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Jan 16, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

As another byproduct of the Alert HQ process we have generated a list of stocks that have broken either above their upper…