Susquehanna maintained a Neutral rating on Wolfspeed (NYSE: NYSE:WOLF) but lowered its price target from $23.00 to $16.00. The firm cited that while the ramp-up of the Mohawk Valley Fabrication (MVF) facility is on track, other business segments have declined. The company's management is reducing capital expenditures (capex) and operating expenses (opex) in response to the need for the core business to accelerate its growth.
The company's revenue from the Durham device facility saw a 14% quarter-over-quarter decrease in June to approximately $64 million, with a further expected drop of 22% in September to around $50 million, which is lower than the previous maximum capacity of $90-$100 million.
MVF's output was at the lower end of the guidance range at about $41 million, falling short of the estimated $46 million due to a delay from an electric vehicle (EV) customer. Revenue from this delay is expected to be recognized in fiscal year 2025.
Despite a slower EV market, EV device revenue grew by over 100% year-over-year, and a 300% increase is forecasted for September. Wolfspeed also reported $2 billion in new device design-ins for the quarter, with $500 million advancing to design wins.
Wolfspeed is advancing its materials segment, with successful scaling at Building 10 for crystal growth and substrate processing.
Consequently, Wolfspeed's management has decided to decrease the fiscal year 2025 capex to $1.2 billion to $1.4 billion, a $200 million reduction from previous forecasts, with an expected further decline to $200 million to $600 million in fiscal year 2026.
Wolfspeed, a semiconductor manufacturer, has been the subject of various price target adjustments by analyst firms due to ongoing developments and challenges. TD Cowen reduced its target to $15 from $25, citing concerns about the company's manufacturing roadmap and plans for liquidity and capital raising.
Citi adjusted its outlook on Wolfspeed, reducing the price target from $25 to $16, due to weakened demand and challenges in the Infrastructure & Energy sector.
Wolfspeed has reported fourth-quarter revenue of $200.7 million, slightly below analyst expectations but marking a 100% year-over-year increase in electric vehicle revenue. For the first quarter of fiscal 2025, the company's revenue guidance fell short of the analyst consensus, projecting between $185 million and $215 million.
InvestingPro Insights
Recent data from InvestingPro provides a more detailed picture of Wolfspeed's financial health and market performance. The company's market capitalization stands at approximately $1.7 billion, indicating a significant size in its sector. However, with a negative P/E ratio of -2.1 and an adjusted P/E ratio for the last twelve months as of Q3 2024 at -3.45, it reflects challenges in profitability. The revenue growth for the same period shows a positive sign at 24.01%, suggesting some areas of the business are expanding despite overall headwinds.
InvestingPro Tips highlight critical concerns for Wolfspeed, such as the significant debt burden and the rapid cash burn. These factors are crucial for investors to consider, especially as analysts have revised earnings downwards for the upcoming period and anticipate a sales decline in the current year. The volatility in stock price movements and the poor performance over the last month, with a price total return of -37.77%, also suggest a cautious approach.
For investors seeking a comprehensive understanding of Wolfspeed's potential and risks, additional InvestingPro Tips are available, providing in-depth analysis and market insights. Notably, the company's stock price has fallen significantly over the past year, and analysts do not expect profitability this year, which could be of particular interest to those monitoring the company's trajectory.
It's worth noting that Wolfspeed's liquid assets exceed short-term obligations, which may provide some financial flexibility in the near term. For a more detailed analysis and further tips, investors can explore the InvestingPro platform, which includes a total of 15 InvestingPro Tips for Wolfspeed.
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