Cree (NASDAQ:CREE) Fairly Valued Says Canaccord

After a strong 2010, Cree's (NASDAQ:CREE) valuation leaves little room for error at this time.

Canaccord says, "Revenues in the quarter were $257.0M with pro forma EPS of $0.53. We were expecting $276.2M/$0.55, and the Street was expecting $276.6M/$0.58. Guidance of $245M-$265M and $0.38-$0.45 is also below Street expectations of -$288M and $0.58. The company attributes the softness to an inventory correction among distributors in Asia.

"Expectations of an increase in OPEX with flattish sales for next quarter is disappointing, but this quarter’s balance sheet had some potential cracks...We are long-term positive on the SSL trend and Cree’s strong position in the industry; however, heightened expectations bid up CREE’s valuation in 2010 and did not leave any margin of error for natural lumpiness in the trend, which we are currently seeing."

Canaccord Genuity reiterates a "Hold" rating on Cree (CREE), which was trading at $53.89, down $8.82, or 14.06 percent, as of 1:18 PM EST. Canaccord has a price target of $54 on Cree.