UPDATE: Morgan Stanley Upgrades Cree Inc from Underweight to Overweight and Raises PT from $28 to $40

Morgan Stanley has published a research report on Cree Inc CREE upgrading the company's stock from Underweight to Overweight. In the report, Morgan Stanley wrote, "(2) Margins stabilizing. Gross margins fell 1100 bps in the last year to 38%, near our expected level of 35%. Accelerating demand and lower inventories could mitigate pricing pressure and keep margins above 35%. (3) Fixture business offers upside. Cree beat the quarter on strength in its branded lighting systems, already more than 10% of revenues and growing faster than we expected. Lighting systems account for all of the incremental revenue in our revised model and contribute 17% to F2013e EPS. (4) Data points supportive." Morgan Stanley upgraded Cree from Underweight to Overweight with a price target raised from $28.00 to $40.00. Cree closed Wednesday at $34.08.