Shares of chip maker Cree dive after revenue forecast falls short; analysts brush off drop

Ahead of the Bell: Cree shares dive

DURHAM, N.C. — Shares of Cree Inc. plunged in premarket trading Wednesday after the company issued a disappointing sales forecast for the current quarter.

Cree, which produces materials for LED lighting products, said late Tuesday that it expects revenue of $270 million to $280 million for the three months ending in September. Analysts had forecast $284 million in revenue, according to a Thomson Reuters survey.

Shares tumbled $7.37, or 10.7 percent, to $61.59 in premarket trading.

But analysts did not see the shortfall as a bad sign for the company’s long-term health.

In a client note, Sterne Agee analyst Andrew Huang said he expects growth in the LED light market to accelerate over the next few years, and he said Cree’s stock will be the best way for investors to tap that growth.

“As is the case with any long-term secular story stocks, there are hiccups along the way,” Huang said. He has a “Buy” rating on the stock.

Morgan Joseph analyst Ilya Grozovsky also kept a “Buy” rating on Cree.

In a client note, Grozovsky said Cree will need to expand capacity to keep up with “solid demand trends.”