ON - Wolfspeed surges 20% as analysts praise 'impressive pipeline' earnings guidance

Wolfspeed ( NYSE: WOLF ) shares surged more than 20% on Thursday as the semiconductor company reported fourth-quarter results and issued guidance that both topped expectations, prompting praise from the analyst community.

Bank of America analyst Vivek Arya, who has an underperform rating on Wolfspeed ( WOLF ) but raised his price target to $89 from $75 following the results, called the figures "strong." However, he noted that the company's success over the next four to six quarters depends on an uncertain launch from the company's new Mohawk Valley fab.

Wolfspeed ( WOLF ) reported adjusted earnings of 2 cents per share on $228.5M in revenue, up 56.7% year-over-year. Analysts were expecting a loss of 10 cents per share on $207.58M.

Looking to the first-quarter of fiscal 2023, Wolfspeed ( WOLF ) said it expects revenue to be between $232.5M and $247.5M, with analysts expecting $224.45M in sales.

Arya also noted that competition is growing, especially from ON Semiconductor ( ON ) and the company is growing spending and its ongoing cash burn could result in a possible "equity-linked event" sometime in the second-half, but record design wins, backlog and non-auto related opportunities are positives.

"Autos represents 70%-75% of WOLF design-in activity, but we note growth vectors in infra/industrial (solar inventers, high-end medical equipment, EV charging stations) that can diversify WOLF’s revenue stream (2300+ non-auto design-ins in last three years)," Arya wrote in a note to clients.

Citi analyst Amanda Scarnati noted that the company had a "significant ramp" in design ins of $2.6B in the quarter, resulting in management to note their 2026 revenue figures will be between 30% and 40% higher than the $2.6B figure they forecast in November 2021.

"The strength in the design ins and conversion to design wins should help to ease some  investor concerns around the competitive environment," Scarnati wrote in a note to clients, while also alluding to comments made by the management team that the silicon carbide market is "growing significantly faster than expected."

Scarnati has a buy rating on Wolfspeed ( WOLF ) and raised her price target to $115 from $95 following the results.

Earlier this month, investment firm Morgan Stanley said Wolfspeed ( WOLF ) could have upside due to its strong market share in the silicon carbide market, a key area for electric vehicles .

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