Wolfspeed Slides 7% YTD: How Should You Approach the Stock Now?

Wolfspeed WOLF shares have declined 7.2% year to date, underperforming the broader Zacks Computer and Technology sector’s decline of 5.7% and the Zacks Semiconductor – Discretes industry’s fall of 4.7%.The underperformance can be attributed to Wolfspeed's weak financial results in the second quarter of fiscal 2025, led by softness in the industrial and energy markets. Weaker demand in these segments weighed on overall revenue growth, limiting the company's ability to generate stronger top-line performance.High underutilization costs at Wolfspeed’s manufacturing facilities, along with lower efficiency during its transition to larger-scale production, have added to its financial strain. The resulting decline in the gross margin has further raised investor concerns about its profitability.While the company's near-term outlook seems unattractive, several factors highlight its strong long-term growth potential, setting the stage for a brighter future.Wolfspeed Price and Consensus  Wolfspeed price-consensus-chart | Wolfspeed QuoteWOLF Bets on EV Market & Business GrowthDespite the lower revenue levels, Wolfspeed continues to see strong growth in key areas, particularly in the EV market, wherein demand remains robust. This momentum is expected to continue, driving higher revenue contributions in the latter half of fiscal 2025.WOLF is nearing the completion of a $5-billion semiconductor factory in Siler City, NC, expected to begin production in June 2025. This facility will manufacture advanced silicon carbide crystals for electric vehicles, contributing to significant regional growth.The expansion of the Mohawk Valley fab is a key development, with revenue increasing sequentially to $52 million. Wolfspeed expects this growth to continue, projecting revenues between $55 million and $75 million for the fiscal third quarter.Wolfspeed has secured significant support under the CHIPS and Science Act, reflecting its strategic focus on advancing U.S. semiconductor manufacturing. The U.S. Department of Commerce has proposed up to $750 million in direct funding to support the company's expansion of silicon carbide production. This government support and strategic partnership reinforce WOLF’s position in strengthening domestic supply chains and driving technological innovation.Investors have a positive outlook on the growth potential of the silicon carbide market. S&S Insider projects the company to witness a 9.7% compound annual growth rate (CAGR) from 2024 to 2032, creating significant opportunities for Wolfspeed.Wolfspeed’s Q3 Forecast Lacks OptimismFor the third quarter of fiscal 2025, WOLF expects revenues of $170-$200 million.    The Zacks Consensus Estimate for revenues is pegged at $186.30 million, indicating a 7.17% decrease from the figure reported in the year-ago quarter.The non-GAAP loss is estimated to be 88-76 cents per share.The consensus mark for the third-quarter fiscal 2025 bottom line is pegged at a loss of 82 cents per share, widened by 3 cents over the past 60 days. The estimate suggests a sharp decline from the year-ago quarter's reported loss of 62 cents.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.What You Should Do With WOLF Stock?Wolfspeed is making strategic moves to expand its silicon carbide production and secure government funding. However, challenges such as widening losses, declining gross margins and underutilization costs persist. With a cautious revenue outlook and ongoing financial pressures, investors may consider waiting for clearer signs of stability before entering the stock.WOLF currently carries a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable time to accumulate the stock.Better-Ranked PicksArista Networks ANET, BWX Technologies BWXT and Cisco Systems CSCO are some better-ranked stocks in the broader tech sector. Each of these three stocks currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The long-term earnings growth rates for ANET, BWXT and CSCO are pegged at 14.41%, 10.13% and 5.10%, respectively.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cisco Systems, Inc. (CSCO): Free Stock Analysis Report Wolfspeed (WOLF): Free Stock Analysis Report Arista Networks, Inc. (ANET): Free Stock Analysis Report BWX Technologies, Inc. (BWXT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks