LED lighting must be a bumpy industry to deal in. Just ask Cree (CREE).
At one point in 2013, Cree stock was up more than 215% from the previous year on strong performance and news that its affordable new LED bulb was going to be stocked nationally by Home Depot (HD). But the shine has been off somewhat in 2014, with CREE down nearly 40% from those lofty heights.
And now? Well, Cree might be ready to start bouncing again, as it recently announced a new product that has the potential to revive its fortunes.
The T8: Cree’s New Hope
Earlier this month, Cree delivered news that it would be releasing the T8, an LED bulb that replaces those fluorescent light tubes you often find in the ceilings of commercial buildings, government offices, schools and some homes.
Fluorescent light tubes have been the standard for energy-efficient commercial lighting for decades, but those long T8 tubes — also known as linear fluorescent bulbs — have significant disadvantages compared to LED bulbs:
- Their lifespan is shorter (most commercial fluorescent T8 tubes are rated for anywhere from 5,000 to 20,000 hours of use).
- They require special light fixtures with a ballast, and the lighting tends to look unnatural.
- According to a report on the U.S. Lighting Market by the U.S. Department of Energy (PDF), the average commercial linear fluorescent bulb in use is rated at 37 watts.
- And according to the DOE report, those fluorescent tubes are eating up 42% of all the electricity used in the U.S. for lighting.
Compare these stats to the new Cree LED bulb. It fits in more than 90% of those existing fixtures, so in the majority of cases, there’s no rewiring or installation of new fixtures required. The Cree T8 uses 21 watts of power (although Cree is only claiming a 30% energy savings since the most widely available T8 fluorescent bulbs are 32-watt models), provides more natural looking lighting, turns on instantly with no flicker, is rated for 50,000 hours of use and comes with a five-year warranty.
Cheaper to operate (by 30% or more) and fewer replacement cycles — a hidden cost that can add up when those banks of light fixture are often placed out of reach? This looks like a big win for Cree stock and investors.
What Could Go Wrong?
The downside is price. The MSRP of $30 seems incredibly cheap considering that household-use LED bulbs were regularly selling for $50 or more just a few years ago, but the Cree T8 LED bulb is going up against fluorescent tubes that can sell in bulk for under $2 each.
CNET’s Ry Crist thinks that the price differential will be problematic, with a decade required to make up the cost premium.
I’m inclined to disagree.