LED lighting company Cree is well-positioned to benefit from industry consolidation and an improved pricing environment, according to one Wall Street analyst.
Oppenheimer & Co. analyst Andrew Uerkwitz on Wednesday raised his rating on the Durham company from “perform” to “outperform” —the equivalent of a “buy” — and set his 12-month price target for the stock at $59. He wrote in a research note that Cree shares are “undervalued due to near-term margin concerns and weak commercial market growth.”
Cree shares closed Thursday at $52.83, up $2.52. The company’s shares have declined 15.5 percent this year.
Uerkwitz said the pressure on LED prices has moderated “due to improving supply-demand balance.” He also sees the increased merger-and-acquisition activity in the sector as a plus for Cree.
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“Given Cree’s strong financial position ($1.2 billion net cash), we believe it is the best positioned among its competitors to gain market share and expand sales channels,” Uerkwitz wrote.
Cree CEO Chuck Swoboda said in April that, although no deals were imminent, the company is looking at acquisitions “more seriously than we have in the past couple of years.” The company hasn’t made an acquisition since Aug. 2011.
Cree makes LED light bulbs and indoor and outdoor light fixtures as well as components that other companies use in LED lights. Its LEDs also illuminate mobile phones, televisions, electric signs and car dashboards.