Shares of LED lighting company Cree fell 11 percent Wednesday as investors reacted to the company’s latest earnings report.
Cowen & Co. analyst Jeffrey Osborne wrote in a research note that Cree’s fiscal third-quarter report, issued after the markets closed Tuesday, “highlighted difficult market conditions and quality issues leading to weaker than expected lighting revenue.”
The Durham company’s revenue for the quarter totaled $342 million, down 7 percent from a year ago. Sales of its LED lighting products fell 18 percent to $154 million as quality control problems on components provided by an outside supplier – problems that the company says have been fixed – hurt its ability to win new projects.
In addition, weakness in the lighting market “continues to hit the top line of most, if not all, major North American lighting manufacturers,” noted Canaccord Genuity analyst John Quealy.
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Cree also unveiled a new joint venture Tuesday that expands its market opportunity beyond the high-power LEDs it focuses on to lower-cost mid-power LEDs. High-power LEDs are best for lighting applications where the beam of light is focused on a specific area, while mid-power LEDs are used in instances where the light is evenly dispersed over a wide area.
Cree will own 51 percent of the joint venture it is forming in Hong Kong with San’an Optoelectronics, a Chinese company.
Osborne sees the joint venture as a plus for Cree, enabling it “to compete in uses where the additional power does not justify the cost premium.”
Cree shares closed Wednesday at $22.07, down $2.75. Its shares have fallen 16 percent this year.