TSLA - Wolfspeed stock plunges as delays from Mohawk Valley facility hurts guidance

2023-04-27 08:11:22 ET

Wolfspeed ( NYSE: WOLF ) shares plunged more than 15% in pre-market trading on Thursday as the semiconductor company issued weaker-than-expected guidance, citing issues at its Mohawk Valley facility.

Canaccord Genuity analyst George Gianarikas, who has a buy rating on Wolfspeed ( WOLF ), said the delay at the company's "critical" Mohawk Valley facility stems from its ability to ramp its 200mm substrate capacity. The company also lowered its fiscal 2024 revenue guidance as a results.

As such, Gianarikas posited whether silicon carbide might be "too hard or scale" given the continued missteps and wondered whether Tesla ( TSLA ) was right to question the ability of silicon carbide to meet the demands for electrification of the economy.

"Wolfspeed's stock will continue to be in the penalty box, and patience will be required," Gianarikas wrote in an investor note, while lowering the firm's price target to $72 from $103. "Nevertheless, the promise of [silicon carbide] and its growing pipeline of diversified customers keep us with our positive stock rating."

Looking to the fourth-quarter, Wolfspeed ( WOLF ) expects sales to be between $212M and $232M, below the $234.64M analysts expect. It also expects to lose between $21M and $29M on an adjusted basis.

For fiscal 2024, Durham, North Carolina-based Wolfspeed ( WOLF ) expects revenue to be between $1B and $1.1B, below the $1.3B analysts were expecting.

William Blair analyst Jed Dorsheimer, who has an outperform rating on Wolfspeed ( WOLF ), said the results are likely to be a large enough reset to provide "realistic expectations," but one that is likely to be the last one investors want to deal with.

"Being the first through the 200 mm door is always a risk, and Wolfspeed and its investors have been taking it on the chin," Dorsheimer wrote in an investor note. "We remain confident in the cost advantages of 200 mm, and Wolfspeed achieving the only 200 mm [silicon carbide] fab is a 'when,' not an 'if.'"

Susquehanna analyst Christopher Rolland noted that while Wolfspeed ( WOLF ) is the "clear market leader" in silicon carbide, continued execution issues are going to allow its competitors, such as STMicroelectronics ( STM ), to close the gap.

"In short, we hope this is the last in a string of setbacks for WOLF, but we reiterate our Neutral rating and decrease our price target from $88 to $60," Rolland wrote.

More on Wolfspeed

• Wolfspeed slips as J.P. Morgan downgrades on worries of short-term issues
• NXP Semiconductors, Wolfspeed top chip stocks heading into earnings
• Wolfspeed stock slips as company set to apply for CHIPs Act funding

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