USA - Is it time to buy Wolfspeed shares after topping Q1 expectations?
On Thursday, Wolfspeed Inc. (NYSE:WOLF) shares rallied more than 25% after releasing solid fiscal first-quarter 2022 results. The company announced its most recent quarterly results Wednesday after markets closed, beating the consensus for analyst estimates. It also guided FQ2 revenue and earnings ahead of Street forecasts.
The company posted FQ1 non-GAAP earnings per share of -$0.21, beating the expectation of -$0.24. However, its GAAP EPS of -$0.60 was significantly below the average analyst estimate of -$0.52, while revenue for the quarter surged 35.6% from the same period a year ago to $156.5 million, $7.01 million ahead of estimates.
The company now expects to report FQ2 revenue in the range of $165-$175 million, compared to the average Street forecast of $159.32 million. In addition, its EPS guidance of -$0.16 to -$0.20 is above the average for analyst estimates of -$0.23.
Is it too late to buy WOLF stock?
From an investment perspective, Wolfspeed shares trade at a steep forward P/E ratio of 1754.49, making the stock too expensive for value investors.
However, the company appears to be turning a corner with 34% sequentially in the most recent quarter, compared to an average annual decline of about 20% over the last five years.
Nonetheless, given Thursday’s sharp spike, it may be best to wait for a short-term pullback before buying the stock.
Technically, Wolfspeed shares seem to have recently spiked to overbought conditions of the 14-day RSI. As a result, the stock has completed a bullish breakout from the ascending channel formation.
Therefore, investors could target potential pullback profits at about $109.38, or lower at $102.39. On the other hand, if the bull-run continues, the stock could find resistance at about $120.07, or higher at $125.87.
Time for profit-talkers to swoop in?
In summary, although Woldspeed appears to be turning a corner, thus offering an exciting outlook, the stock has recently spiked, creating an opportunity for investors to take some profits.
Therefore, with shares trading deep into overbought conditions, it may be best to wait for a short-term pullback before buying.
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