Yahoo Finance Cree, Inc. (NASDAQ:CREE): Is Breakeven Near?
We feel now is a pretty good time to analyse Cree, Inc.'s (NASDAQ:CREE) business as it appears the company may be on the cusp of a considerable accomplishment. 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?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
View our latest analysis for Cree
Consensus from 15 of the American Semiconductor analysts is that Cree is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$127m in 2024. The company is therefore projected to breakeven around 3 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 81% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of Cree's upcoming projects, but, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
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 in investing in the loss-making company.
Next Steps:
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.
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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