Rallying Cree Stock Gets a Rare Bull Note

Cree will report earnings in a couple weeks

Aug 3, 2018 at 10:37 AM
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Cree, Inc. (NASDAQ:CREE) is trading up 3.8% at $49.52, after Canaccord Genuity began coverage on the lighting expert with a "buy" rating and $61 price target, territory not seen since March 2014. In its note, the brokerage firm highlights the leadership of new CEO Greg Lowe, who it calls a "unique CEO" that leads by example. It also cites the company's shift in focus to higher value products will allow it to address the lighting market as a component supplier.

Even though CREE shares have more than doubled in the past year and hit a multi-year high of $50.68 back on June 13, they've received almost no love from the analyst community, save today's bull note, of course. In fact, just one of the nine brokerage firms in coverage have anything better than a "hold" rating before today, and the average 12-month price target sits down at $43.70. Traders should watch for more bullish attention going forward.

Meanwhile, the equity remains a strong candidate for a short squeeze. And actually, short interest rose another 24.6% in the last reporting period, and now accounts for 12.5% of the overall float. With earnings set for release in less than two weeks, a strong quarter could cause some of these bears to cover their positions.

As for options activity, volume has been light on an absolute basis, but peak open interest resides at the September 44 call. Traders, whether bullish or bearish, may want to consider Cree, however, since it's been a good target for premium buyers during the past year. That's according to its Schaeffer's Volatility Scorecard (SVS) of 80 out of 100, which shows it's tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.


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