Wolfspeed (WOLF) Up 10.1% Since Last Earnings Report: Can This Continue?

A month has passed since Wolfspeed’s (WOLF) last earnings report. Shares have risen about 10.1% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or should Wolfspeed pull out? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Wolfspeed reports third quarter profit loss and y/y revenue growth

Wolfspeed reported a third-quarter fiscal 2024 non-GAAP loss of 62 cents per share, narrower than the Zacks Consensus Estimate of a loss of 64 cents per share but wider than the year-ago quarter’s loss of 34 cents per share action.

Revenues of $200.7 million increased 4.2% year-over-year but missed the consensus estimate by 0.39%. Mohawk Valley Fab had revenue of $28 million in the reported quarter.

Energy products accounted for 50.9% and material products 49.1%. Power Products revenue increased 0.5% year over year to $102.1 million. Materials Products revenue increased 8.4% year-over-year to $98.6 million.

The value of power equipment projects in the reported quarter was $2.8 billion. Quarterly project wins amounted to $0.9 billion, of which 70% were related to automotive applications.

Operational details

In its fiscal third quarter, Wolfspeed reported a non-GAAP gross margin of 15%, compared to 33.9% reported in the year-ago quarter.

During the quarter, selling, general and administrative expenses were $55.8 million (27.8% of total revenues), an increase of 1.3% year over year.

Research and development expenses (26.2% of total revenues) increased 23.8% year over year to $52.5 million.

During the third quarter of fiscal 2024, Wolfspeed incurred $14.4 million in plant start-up costs and $30.4 million in underutilization costs.

The company incurred a non-GAAP operating loss of $79 million, which was greater than the operating loss of $66.6 million in the year-ago quarter.

Balance sheet and cash flow

As of March 31, 2024, WOLF had cash, cash equivalents and short-term investments of $2.55 billion, compared to $2.64 billion as of December 31, 2023.

Free cash outflow amounted to USD 616 million, including USD 136 million of cash outflow from operating activities and USD 480 million of capital expenditure.

Conductivity

For the fourth quarter of fiscal 2024, Wolfspeed expects revenue in the range of $185 million to $215 million. Non-GAAP loss is expected to be 72-86 cents per share.

The company expects the Mohawk Valley plant to generate revenue of nearly $40 million to $50 million in the fourth quarter of fiscal 2024.

It expects non-GAAP gross margin in the 8-16% range. Non-GAAP operating costs are expected to be between $116 million and $122 million.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

As a result of these changes, the consensus estimate moved by -21.14%.

VGM results

Right now, Wolfspeed has a poor growth grade of F, a grade with the same score on the momentum front. Following exactly the same trajectory, the stock is rated F for value, putting it in the fifth quintile for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. No wonder Wolfspeed carries a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Wolfspeed (WOLF): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research