Wolfspeed Inc. (NYSE: $WOLF) is a US-based developer and manufacturer of wide-bandgap semiconductors. It is a world leader in Silicon Carbide and GaN solutions for radio frequency and high-power applications. Its chips are widely used in the auto industry, where various companies use them to power their electric cars.
Wolfspeed Inc. (WOLF) Dismal Performance
WOLF stock has had a dismal 2023. The stock is valued at $44.84 per share as of Friday, December 22, 2023, after losing 33.29% of its value year-to-date. The figure is in stark contrast to the technology sector, which has had a great run in 2023.
For instance, the NASDAQ 100 Technology Sector (^NDXT) Index is up 67.02% year-to-date. Individual stocks in the semiconductor industry have had a great performance. For instance, Micron has seen its stock rise 72.23% year-to-date.
Upcoming Earnings Report
Investors will be closely watching Wolfspeed’s upcoming earnings report for Q2 2024. Analysts are predicting an EPS of -$0.63, which would be a Y/Y decline of 472.73. They are also forecasting revenues of $205.94 million, a Y/Y decline of 4.7%.
Wolfspeed’s guidance for Q2 2024 is in line with the analysts’ estimates. In its Q1 2024 earnings report, the company predicted a net loss of $0.56 to $0.70 per share and revenue of $192-$222 million.
Why WOLF Stock is Underperforming
One reason why WOLF stock is underperforming is its focus on a niche sector in the semiconductor industry. According to a report by DataHorizon Research, in 2022, the semiconductor industry was worth $605.1 billion.
Wolfspeed focuses on the silicon carbide niche market, which is valued at $6 billion, having grown from just $400 million five years ago, according to CEO Gregg Lowe. Most of its chips are sold to the auto industry. Unfortunately, harsh global macroeconomic conditions have led to a decline in new car sales.
Another reason for the sluggish performance of WOLF is that it is incurring substantial startup costs. The company is setting up facilities to expand its production. When those facilities start producing chips, it will take a while before demand can scale up and they can turn a profit.
Wolfspeed Stock Forecast
Wall Street analysts have given WOLF stock a buy rating. They predict a peak price of $57 and a low of $34. Their average target of $47.71 is a 6.67% upside on the last price of the stock.
Should You Buy WOLF Stock?
A significant concern for investors is the rate at which Wolfspeed has been burning through cash. The company has sunk billions of dollars into development, and the situation is likely to stay the same for a while.
However, it is also a fact that the electric vehicle sector is growing rapidly, which will raise demand for its silicon carbide chips. In general, investors assign a high level of risk to WOLF stock, which explains why its value has dropped by double digits in 2023. Nevertheless, it has the potential to generate massive amounts of revenue as the macroeconomic conditions improve.
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