LED manufacturer, CREE (CREE: chart, web, Y!), is still looking strong, and I’ve been able to take advantage of some pull backs in the market since making my last purchase.

Recently, coverage was initiated at JP Morgan with an Overweight rating and $45 price target.  Additionally, CREE will be adding more than 500 jobs over the next three years as it expands production of light-emitting diode chips at its Durham, NC plant.

I’ll be looking to add more shares in my Roth IRA account on the next pull back in the stock, and I think $50 per share is a reasonable expectation for this growing company.  LED’s are just now becoming main stream, and the market will be expanding over the next 10 years.

Investing CREE, Investing, LED lighting

I wrote a few days ago about CREE (CREE: chart, web, Y!), a company that makes LED lighting components, including the lights themselves.

I feel that LED lights aren’t too far away from replacing incandescent and mercury containing CFL bulbs, and that products are already showing up on local store shelves, although prices have yet to come in at an economic range.

I’ve been perusing the companies 2008 annual report over the last couple days, and studied the financial numbers from the last several years.

Annual Revenue

As of the end of June, 2008, total revenues were on the rise to a level just shy of $500 million, with a 33.6% gross margin on revenues.

LED products (LED chips, components and lighting solutions) made up a total of 84% of total revenues, materials (SiC wafers, etc) made up just under 6% and power and RF products (power and RF switches) made up 4%.  The rest of the revenues came in the form of contracts with government agencies.

At the end of FY08, the company had $371 million in cash and marketable securities on hand and $408 million in working capital.

Diluted incomer per share was $0.36 at the end of FY08, which was down considerably from previous years, the high of which came in 2005 at $1.38 per share.

The company continued its streak of zero debt, a statistic maintained since as far back as 2004 or earlier.

The Most Recent Quarter

Naturally a lot has changed since the end of FY08 (nearly a year ago) and a FY09 report is due out in the next few months.

For Q3 ‘09, revenues of $131 million were 5% higher than the same quarter of 2008, but not surprisingly, down 11% compared to Q2 ‘09.

Operating cash flow for the third quarter came in at $49.9 million and the company generated $40.5 million of free cash flow.

The company built upon its cash reserves, increasing cash and investments to $404.9 million, and has maintained zero debt through the third quarter of fiscal 2009.

Recent News

On May 26th of this year, CREE announced that they are raising their financial targets for the fourth quarter of 2009, which is a pleasant headline to be reading in this economic environment.

The company says that the increase in targets is due to stronger LED component bookings for lighting-related applications such as laptops, displays, etc.

The company forecasts LED product sales to continue to grow into FY 2010 and will continue to spend money on R&D to make that forecast come true.

Corner Office Comments

I am more intrigued with this company the more I read.  The financial numbers look strong, and revenues have been maintained at healthy levels even in a down economy.  This could be a function of the company offering products that equate to energy savings with long product life cycles, making their products attractive to cities and municipalities (among other entities) trying to cut operating expenses when budgets are shrinking.

The zero debt is a major selling point, and the fact that the company has over $400 million in cash to work with makes the deal even sweeter.

I think this is a strong company with a promising product line.  They already market their LR6 downlight product that will replace 65 Watt flood-type recessed lights in your everyday residential application, and I suspect a replacement for traditional round incandescent bulbs is right around the corner.

I see prices coming down as LED lights gain traction in the market (LED’s have already replaced filament type Christmas lights) and CREE should be well positioned to take advantage of the next big technology shift in such a widely used market as home and business lighting applications.

The stock price has been fluctuating for the last several months, but the trend has been overwhelming positive since the beginning of 2009.

I’ll start buying some shares on the next downswing and I think the long term prospects for the stock is very promising.

Investing, Stock Thoughts, Technology CREE, LED, LED lighting, Technology

I’ve been thinking about energy lately, or more specifically how to save some in my house.  I made a switch to CFL light bulbs in many cases, but I think I’m going back to good old incandescents.

I can’t use CFL’s in cases where I want to use a dimmer, like over the vanity in our master bathroom, and in the basement where we dim some lights for good movie viewing.

CFL’s are also a bit inconvenient in that you can’t just throw them out with the rest of the garbage due to the fact that they contain mercury.  And that’s another major point; they contain mercury.  If you break a CFL bulb, you have to ventilate the room, scoop up the debris and put it in an air tight container.

Some people will argue that there isn’t enough mercury in each bulb to really harm you, but my position is that if there’s too much mercury to throw out in the trash, there’s too much mercury in them, period.

Another alternative?

LED lights.  These things are amazing, and they’re showing up everywhere.  From big screen TV’s to laptops (they’ve been around in laptops for a while), to the red lights in stop lights…  They’re solid state bulbs with no moving parts and no volatile or poisonous gases.  Most of them will last as many as 20,000 hours or so, which means I’d have to replace them when my 5 month old son graduates from high school.

The one drawback is that they’re still pricey, and the traditional 40 to 60 Watt replacements haven’t matured quite yet, although you can already buy the “flood” type bulbs at Home Depot.

An investment of two types…

If LED lights can last as long as advertised and can come down in price quite a ways, I’d certainly entertain the thought of replacing my CFL’s and incandescents with straight LED’s.  I look at is an investment with a return of lower energy costs, both in the form of direct electrical consumption and thermal savings (did I mention LED’s don’t produce much heat?).

In addition, I could also make an investment in the company that develops LED’s as well.  A company like CREE (CREE: chart, web, Y!)) would be a good bet, and they’re making advances in LED technology nearly as fast as prices on technology are dropping.

I’ll be researching CREE over the next several days, as I think this could be a company worth investing in that produces a product that’s worth buying.

Environment, Technology CREE, LED lighting, Technology