Recently, an Oppenheimer & Co. analyst upgraded Cree Inc., saying its LED are at last being adopted as a mainstream lighting product. The high cost of energy and efforts to curb greenhouse gases are prompting customers to consider energy-saving solutions, Oppenheimer analyst Yair Reiner wrote in a note late Thursday, in upgrading the company to "Outperform" from "Perform."
White-light LEDs are far more energy-efficient than incandescent bulbs and rival fluorescents, but their high cost has limited their adoption so far. Now, Reiner said, lighting contractors, fixture markers and distributors have begun to focus resources on LEDs. Reiner indicated that after years of waiting and hoping, LEDs are beginning to gain traction in general lighting applications, and we believe Cree has positioned itself as a major enabler and beneficiary of this transformation.
Reiner assigned a $31 price target, which he said works out to 52 times next year's estimated earnings per share -- a high multiple, but in line with the range of the last two years.
In pre-market trading Friday, shares of the Durham, N.C.-based company were up $2.21, or 8.6 percent, at $28. The stock has traded between $17.10 and $35.50 over the past year.
