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Technology Stocks : Cree Inc.
CREE 49.71-2.2%3:59 PM EDT

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To: slacker711 who wrote (10001)8/22/2019 10:02:19 AM
From: slacker7114 Recommendations

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Random thoughts on Cree's earnings.

- The trade war is having an enormous impact on the business. LED revenue was down ~25% YoY and gross margins are now targeted to be only 17% in the December quarter. Cree has begun transitioning some of that capacity to Wolfspeed but it takes time to ramp the device capacity (less so for materials).

It sounds like they are expecting at least some of the impact of the Huawei ban to be alleviated as the supply chain shifts. I assume that Cree was selling some SiC devices to Huawei and will now likely supply SiC wafers to non-US device suppliers to Huawei.

A number I would have liked to hear was LDMOS RF sales to Huawei. Those are likely permanently lost.

- Maybe I missed it, but this is the first time I can remember management mentioning a long-term gross margin target for Wolfspeed in the low to mid-50's. I had thought that they were targeting low-50's. A fairly positive change if my memory is correct.

- I am not generally a fan of metrics like "opportunity pipeline". However, the growth in this number does grab your attention. Last October, Cree had talked about a $1 billion dollar pipeline in SiC power components. Last quarter, it was a total of $5 billion for RF and Power....and now they used $9 billion. Presumably are defining that as the total dollar amount available for new design wins over the lifetime of the project.

They gave a timeline of 12 months or so to start seeing those "opportunities" being translated into design wins. To fulfill their potential, we need to see Cree gain traction in tier-one vendors for SiC components. Winning a direct supply agreement with companies like Volkswagen or Tesla would be huge.

- Is the recent deal with On Semi their 2nd deal with them?

- Dilution was an insane 2% during the quarter and almost 5% for the year. This is just shareholder robbery.

On the positive side, there has been zero insider selling since last August.

Slacker
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