WOLF - Wolfspeed rises as Jefferies initiates coverage with hold rating

2023-05-18 09:30:16 ET

Wolfspeed ( NYSE: WOLF ) shares rose fractionally in pre-market trading on Thursday even as Jefferies started coverage on the semiconductor company with a hold rating.

Analyst Natalia Winkler noted that she likes Wolfspeed's ( WOLF ) position in the silicon carbide market and the opportunity to become a "fully integrated device player," but with interest rates where they are and recession concerns rising, it's unlikely investors will give the North Carolina-based Wolfspeed a premium valuation.

"We view the risk/reward as balanced," Winkler wrote in an investor note, adding concerns about profitability and a rising net leverage ratio.

Winkler added that she believes the demand for silicon carbide will surpass $5B in 2025 and $9B by 2030, with Wolfspeed ( WOLF ) expected to be a leader int he market following announcements of design wins from five automotive makers.

However, she added the company's ramp up of its 8" design is going "slower than originally expected," leading to flat gross margins over the near term. Additionally, the company is slated to spend $6.5B in capital spending over the next few years at three fabs: Mohawk Valley and Saarland for silicon carbide front-end and Siler City for silicon carbide materials.

More on Wolfspeed

• Wolfspeed stock plunges as delays from Mohawk Valley facility hurts guidance
• Wolfspeed slips as J.P. Morgan downgrades on worries of short-term issues
• Wolfspeed stock slips as company set to apply for CHIPs Act funding

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