Cree, Inc. (CREE), Rubicon Technology, Inc. (RBCN), GT Advanced Technologies Inc (GTAT): Should You Follow the Analyst or the Company?

Theoretically, an analyst’s job is to analyze and then assess a company, and to give an outlook. However, there is a thin line between the reports of an analyst and guidance from a company when it differs. In the case of Cree, Inc. (NASDAQ:CREE), we find a clear example.

The Company Or The Analyst?

Cree, Inc. (NASDAQ:CREE) traded higher on Wednesday by nearly 4% after Piper upgraded the $55 stock to “Overweight” and issued a $70 price target. The firm noted survey data which suggests strong consumer willingness to pay a premium for high-quality LED bulbs – Cree manufacturers and sells LED bulbs – due to them being energy efficient.

In 2013, Cree, Inc. (NASDAQ:CREE) has skyrocketed higher by 65% due to the excitement surrounding its new LED bulbs, but that optimism was put in check with weaker than expected fiscal fourth quarter sales and guidance, which has caused shares to fall 25% since August 13.

Investors had hoped that LED bulbs would catapult Cree, Inc. (NASDAQ:CREE)’s margins, sales, and lead to higher guidance; LED makes up more than 55% of Cree’s total sales. However, the company’s 22% revenue growth and its guidance was disappointing, and most of the weak performance was due to both the introduction of cheaper bulbs and also weak demand.

Looking ahead, we have a company whose outlook is not too bright. Then, we also have an analyst who is issuing a more bullish view on the LED market. Strangely, Piper’s outlook is just days after Cree, Inc. (NASDAQ:CREE) announced earnings.

Therefore, I think investors have to honor the company’s guidance, trusting that nothing drastic has occurred within the space during the last two weeks to change Cree’s outlook.

Pay Attention To Suppliers

Another piece of this puzzle are companies who are connected to the LED market. Rubicon Technology, Inc. (NASDAQ:RBCN) and GT Advanced Technologies Inc (NASDAQ:GTAT) traded higher by 5.4% and 1.1% respectively behind the analyst’s call.

Rubicon Technology, Inc. (NASDAQ:RBCN) is a LED wafer vendor, and has more than doubled in 2013 with the rise in demand for LED lighting. However, the company’s total revenue is yet to rise year-over-year, and the majority of gains have been due to speculation.

With Cree, Inc. (NASDAQ:CREE)’s guidance being soft, I’d be careful with this particular stock right now. Rubicon Technology, Inc. (NASDAQ:RBCN) is trading at 52-week highs, and clearly responded to the LED outlook report from Piper. Yet, with Cree’s guidance being recent, and it being unlikely that a major demand shift had occurred in the last week, investors might should anticipate a pullback in this small supplier.