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CREE – Market expectations are for record-high Uniform ROA, but management may be concerned about demand, capex, and their power and RF sales

July 6, 2020

  • Cree, Inc. (CREE:USA) currently trades above historical averages relative to UAFRS-based (Uniform) assets, with a 2.7x Uniform P/B. At these levels, the market has bullish expectations for the firm, but management may be concerned about silicon carbide demand, their capex plans, and weakness in power and RF sales

  • Specifically, management may lack confidence in their ability to invest in capacity to meet silicon carbide demand, execute their capex spending plan, and mitigate revenue declines. Furthermore, they may have concerns about the slowdown in the Chinese economy, ongoing weakness in power and radio frequency (RF) device sales, and their liquidity position. Moreover, they may lack confidence in their ability to manage their transformation and transaction-related costs and deploy sales and marketing resources

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