Earnings estimates, year-end price-target:http://www.tsrec.com/creevaluation.html
I hate to appear dumb although it is a state I am familiar with...who were these people making this recommendation?
If, at the end of 2000, Cree trades at 160x this estimate, based on expected long-term annual earnings growth of 80%, its shares will be worth $501, still leaving a lot of short-term as well as long-term upside to its current stock price in spite of the huge run-up it's recently had. I wonder about the "expected long-term annual earnings growth of 80%". Where did this number come from? According to the data here at TMF, the estimated long-term annual growth for CREE is 42.5%:http://quote.fool.com/estimates/estimates.asp?symbols=CREEDon't get me wrong - I hope the stock price goes to $501 by years' end, as I've been long since early January. But, as the author of the calculations pointed out, it is only a crude estimate and nothing more. Many other values in these calculations could be different from reality (hopefully, of course, the reality turns out to be much better than this estimate!). As far as who the author is, I don't know that either, but I've read some of his/her recommendations on other companies and agree with a lot of what I read. This person, whoever he/she is, likes a lot of the same companies I do for a lot of the same reasons.Jason
Addendum to my previous post:I just read on the author's web site that she/he determines estimated share price by doubling the estimated long-term growth rate and multiplying this number by expected earnings. So, using the estimated growth rate of 42.5% along with the author's 2001 EPS estimate of $3.13, we would get a share price of:(42.5)(2)($3.13) = $266 at the end of this year.Not horrible, but I'm certainly hoping for better...Jason
Jason, before you take the analyst estimates as remotely useful, look at the long-term expected growth set out on the following companies:Qualcomm (CDMA handset growth around 100%) - 35%JDS Uniphase (expect at least 110% sales growth this year) - 45%QLogic (75% sales growth and accelerating) - 30.5%Brocade - (300%+ sales growth last quarter) - 44.5%Network Appliance - (100% sales growth and accelerating) - 47.5%I could go on and on. The point is that long-term growth estimates on the part of analysts, like quarterly estimates, are inentionally kept obscenely low; and considering that the market for Cree's LEDs runs well into the billions, and that LED sales growth is 105% and rapidly accelerating, I'd say this is the case with your 42.5% number as well.Erichttp://www.tsrec.com
Eric,Great post. IMHO I think the traders are finally out of the market and letting the stock price settle down. I think gradually activity will pick as the management releases an update on how some of the research is progressing but in no way do I think they will do that to just pump up the price.I expect the stocks to really start to take off when the expansion to the factory is completed and comes on line. Most certainly the revenue will jump with the increased production and IMHO we should see $300 before the end of the year as long as they stay on track for construction. They are expected to complete construction this fall are they not?Ken
Hello to you all.I began to look at CREE after reviewing the DVD market and learning that blue lasers can change this and all other optical information markets. I have read most of the messages posted here and the CREE news from the last year and financials and their website. I have been continuing to follow the discussion.Cree has stated that they don't look at their LEDs as their major market. HP now offers blue LEDs? I haven't seen any recent information about how their laser development is progressing.Am I missing some information about their lasers and some information that would more clearly define their company strategy? Bill
Eric:The point is that long-term growth estimates on the part of analysts, like quarterly estimates, are inentionally kept obscenely low; and considering that the market for Cree's LEDs runs well into the billions, and that LED sales growth is 105% and rapidly accelerating, I'd say this is the case with your 42.5% number as well.I agree that analysts' estimates are typically on the low side for rapidly growing markets like Cree's. However, I guess I prefer to err on the conservative side when trying to read my crystal ball. I much prefer to be pleasantly surprised by a stock's performance than the other way around. (That said, I secretly think there's a good chance to hit $500 by year's end... :)I am curious, though: how did you arrive at your estimated 80% LT annual growth figure?JasonP.S. Nice web site!
I agree that analysts' estimates are typically on the low side for rapidly growing markets like Cree's. However, I guess I prefer to err on the conservative side when trying to read my crystal ball. I much prefer to be pleasantly surprised by a stock's performance than the other way around. (That said, I secretly think there's a good chance to hit $500 by year's end... :)I was aware of the rather high price target, and did what I could to keep it from going higher. If you look at the math I did, my estimate, which is based on only 1/3 of capacity being utilized in 2001, and profit margins for the LED division remaining steady, and no profits to be attained from RF chip and blue laser sales, might be a bit conservative as well.I am curious, though: how did you arrive at your estimated 80% LT annual growth figureMaybe I should've went over this a little more. My estimates for the next two years guess that earnings will grow at an average of about 132% to $3.13/share in 2001. 80% 5-year earnings growth from the company's current $.58 base would result in EPS of $10.95 in five years. After these two years, I guessed that on the low end, Cree would grow its earnings by 70% for the next three years due to continuing LED sales growth, expected to be over 85% of Cree's profits by 2001, as well as blue laser and base station chip sales. However, that by itself would lead to EPS of $15.38 five years from now. So even that 80% estimate might be on the low-end.Hope this answers your questions,Eric
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