With the business potentially at an important milestone, we thought we'd take a closer look at Cree, Inc.'s (NASDAQ:CREE) future prospects. Cree, Inc. provides lighting-class light emitting diode (LED) and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, and internationally. With the latest financial year loss of US$192m and a trailing-twelve-month loss of US$224m, the US$12b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Cree will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Cree is bordering on breakeven, according to the 15 American Semiconductor analysts. They expect the company to post a final loss in 2023, before turning a profit of US$127m in 2024. Therefore, the company is expected to breakeven roughly 3 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 81% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Cree given that this is a high-level summary, however, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with Cree is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Cree's case is 43%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of Cree which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Cree, take a look at Cree's company page on Simply Wall St. We've also compiled a list of important factors you should further examine:
- Valuation: What is Cree worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Cree is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cree’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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