Cree New Coverage: $25 Trefis Price Estimate
Cree, Inc. (NASDAQ:CREE) is the a leading manufacturer of LED chips, components and lighting products. In 2010, it recorded revenues of over $1 billion, gross profit of around $500 million and had market share of over 9% in the global $10 billion LED manufacturing industry. Cree competes with other large LED manufacturers such as the Korea based Nichia, Europe based OSRAM Semiconductor GmbH (OSRAM), Toyoda Gosei Co., Ltd, and Epistar Corporation.
We recently launched coverage on Cree with a $25.26 price estimate for the company’s stock. Our estimate is in line with the market price.
Launch of Coverage on Cree; $25.26 price estimate
We have broken down our analysis of Cree networks into two major segments:
See our complete analysis of Cree here
Global LED market
The LED market started in the 1960s with low-brightness color indicators in electronics products. LED has since expanded into higher brightness and white-color applications, starting with mobile and laptop backlighting to larger-screen backlighting (LCD/LED TVs) as well as other brighter white-color applications. The backlighting market accounted for around 60% of global LED revenues in 2010.
The biggest untapped market for LEDs, however, is the general lighting market which is still dominated by the traditional incandescent light bulbs and CFL technology. LED’s market share in 2010 remained low at around 7 percent. However, LEDs are becoming cheaper and as their prices drop, LED penetration in the lighting market is expected to rise. Moreover, institutions globally are planning to phase out of incandescent lighting in favor of more energy-efficient lighting.
Cree’s Strength in LED
Cree is one of the largest players in the global LED market with around 9% market share. In mid-2011 it acquired Ruud Lighting for $525 million making its entry into the downstream LED lighting business.
Cree’s LEDs score high on performance benchmarks like color consistency and high brightness across a wide viewing area. Moreover, LED pricing is competitive and in line with bigger players like Nichia (the market leader). The Ruud Lighting acquisition allows Cree to extend its leadership position and increase the adoption of energy-efficient LED lighting. It also gives Cree a broader presence in the lighting systems market, and also the expertise to develop the next generation of industry-leading, lighting-class LED components.
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