Cree, Inc. (CREE) shares rose more than 8% during Wednesday's session after JPMorgan upgraded the stock to Neutral and raised its price target from $40 to $60. Analyst Paul Coster believes that Cree's transition to electric vehicles (EVs) and 5G capabilities is merely delayed, not stopped, by COVID-19's near-term disruption. While near-term prospects "look quite poor" due to lower EV demand, the analyst anticipates strong demand for Wolfspeed silicon carbide (SiC) materials and power modules in fiscal 2023.
Last month, Cree reported third quarter revenue that fell 21.4% to $215.5 million, missing consensus estimates by $550,000, while non-GAAP net losses came in at 14 cents per share, beating consensus estimates by one cent. Management expects fourth quarter revenue of $185 million to $215 million and a loss per share of $0.15 to $0.23.
Roth Capital also raised its price target to $55 per share following the financial results, saying that Cree's status as a leading supplier of SiC materials and devices used in battery electric vehicles (BEVs) gives it high visibility into rebounding growth after COVID-19.
From a technical standpoint, the stock broke out from trendline resistance to retest prior highs of around $54.00 during Wednesday's session. The relative strength index (RSI) moved into overbought territory with a reading of 71.25, but the moving average convergence divergence (MACD) remains in a robust bullish uptrend. These indicators suggest some consolidation before a long-term move higher.
Traders should watch for a breakout from prior highs of $54.00 before a period of consolidation. If the stock continues higher, traders could see a move toward R2 resistance at $55.46 over the coming sessions. If the stock breaks down, traders could see a move back into the price channel with a lower bound near $45.00, although that scenario appears less likely given the strong bullish momentum since mid-March.
The author holds no position in the stock(s) mentioned except through passively managed index funds.