Wolfspeed Stock Plunges 22% in a Month: What Should You Do Now?

Wolfspeed WOLF shares have fallen 22% in the past month, underperforming the broader Zacks Computer and Technology sector’s growth of 3.5% and the Zacks Semiconductor – Discretes industry’s decline of 10%.The underperformance can be attributed to its dismal financial performance in the first quarter of fiscal 2025, as reported on Nov. 6.Wolfspeed recorded revenues of $194.7 million, declining 1.4% from the prior-year period and missing the Zacks Consensus Estimate of $200 million. The non-GAAP gross margin dropped to 3.4%, led by a lower revenue mix from the industrial and energy sectors, along with reduced product margins from the Durham Fab.Additionally, the company is facing rising restructuring costs due to its facility closures and consolidation efforts as it transitions to a 200mm wafer device fabrication technology from the current 150mm. WOLF’s heavy reliance on foreign sales and growing competition from China in the silicon carbide market are putting pressure on the company.Wolfspeed Price and Consensus  Wolfspeed price-consensus-chart | Wolfspeed QuoteChallenging Q2 Outlook for WolfspeedFor the second quarter of fiscal 2025, Wolfspeed expects revenues of $160-$200 million.The Zacks Consensus Estimate for revenues is pegged at $179.42 million, indicating a 13.91% decrease from the figure reported in the year-ago quarter.Non-GAAP losses are estimated to be in the band of 89 cents to $1.14 per share.The consensus mark for earnings is pegged at 98 cents per share, revised downward by 9 cents over the past 60 days. This forecast suggests a year-over-year decline of 78.18% and significant challenges from last year.Everything Not So Gloomy for WOLFWolfspeed is focusing on strengthening its capital structure and streamlining its operations costs by focusing on producing advanced 200mm silicon carbide products. This move aims to enhance yields and reduce costs, positioning the company for improved profitability.The company is building state-of-the-art silicon carbide facilities at Mohawk Valley and North Carolina locations to generate around $3 billion in annual revenues from its 200mm silicon carbide production.WOLF aims to benefit from the growing demand for silicon carbide in electric vehicles (EVs), and the industrial and energy markets. These sectors are experiencing significant growth as the world shifts toward cleaner and more efficient technologies.Wolfspeed has secured up to $2.5 billion in funding, including $750 million under the CHIPS Act and another $750 million from its lending group. This funding strengthens the company’s ability to expand its U.S. production, supporting its long-term growth and market position.Although demand is expected to ramp more slowly, Wolfspeed is capturing a significant EV market share. In the first quarter of fiscal 2025, the company achieved $1.3 billion in design wins, the third-highest on record, and $1.5 billion in design-ins, with about 70% linked to EV platforms.Wolfspeed’s Zacks RankWOLF currently carries a Zacks Rank #3 (Hold).Wolfspeed has taken steps to secure funding and achieve design milestones. However, it is facing challenges, including declining gross margins, wider net losses, restructuring costs and a cautious revenue forecast. Given these factors, it may be wise to wait for a more favorable entry point before investing in the stock.Better-Ranked PicksNVIDIA NVDA, Fortinet FTNT and OSI Systems OSIS are some better-ranked stocks in the broader tech sector. Each of the 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 NVDA, FTNT and OSIS are pegged at 20.00%, 18.28% and 12.85%, respectively.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 NVIDIA Corporation (NVDA): Free Stock Analysis Report Wolfspeed (WOLF): Free Stock Analysis Report OSI Systems, Inc. (OSIS): Free Stock Analysis Report Fortinet, Inc. (FTNT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks