Wolfspeed Stock Plummets: Weaker Sales, Outlook, and Job Cuts
Thursday, Nov 7, 2024 11:59 am ET
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Wolfspeed, Inc. (NYSE: WOLF), a leading bandgap semiconductor company, has experienced a significant drop in its stock price following the release of its first quarter fiscal 2025 financial results and outlook. The company's shares shed more than 20% during early market action on Thursday, November 7, 2024, as investors reacted to the disappointing news.
The decline in Wolfspeed's stock price can be attributed to several factors, including weaker-than-expected sales and a gloomy outlook for the future. The company reported consolidated revenue of approximately $195 million, a slight decrease from the previous year. The Mohawk Valley Fab contributed approximately $49 million in revenue, but this was offset by underutilization costs primarily related to the start of production at the facility. These underutilization costs, totaling $26.4 million, contributed to a GAAP gross margin of approximately -19%, a significant decline from the previous year's 13%.
Wolfspeed's automotive business, which accounts for a significant portion of its revenue, grew by only 2.5 times year-over-year. This slowdown in growth can be attributed to a decline in EV market demand, which has impacted the company's power device design-ins and design-wins. The company's CEO, Gregg Lowe, acknowledged the challenges in the EV market and the need to align the business with current market conditions.
In response to these challenges, Wolfspeed has announced a restructuring plan that includes the closure of its manual Durham 150-millimeter Fab and other manufacturing footprint rationalization. These moves are expected to yield approximately $200 million in annual cash savings and support the company's transition to a pure-play 200-millimeter platform. However, these restructuring efforts have also resulted in job cuts, which may impact employee morale and retention, as well as the company's product development and innovation pipeline.
For the second quarter of fiscal 2025, Wolfspeed targets revenue from continuing operations in a range of $160 million to $200 million. The company expects a GAAP net loss of $401 million to $362 million, or $3.14 to $2.84 per diluted share. Non-GAAP net loss is targeted to be in a range of $145 million to $114 million, or $1.14 to $0.89 per diluted share. These targets do not include any estimated change in the fair value of the shares of common stock of MACOM Technology Solutions Holdings, Inc. (MACOM) that Wolfspeed acquired in connection with the sale to MACOM of its RF product line.
Wolfspeed's recent performance and outlook have raised concerns among investors, as the company grapples with underutilization costs, declining EV market demand, and the impact of restructuring efforts on its operations and workforce. Despite these challenges, the company remains committed to its long-term strategy of becoming a pure-play 200-millimeter silicon carbide company and capturing growth opportunities in its core end markets.
As an investor, it is essential to stay informed about the latest developments in the companies you invest in and the broader market trends that may impact their performance. While Wolfspeed's recent struggles may be concerning, the company's long-term strategy and commitment to innovation could present opportunities for investors who are willing to weather the short-term challenges. By maintaining a diversified portfolio and focusing on income-generating investments, investors can mitigate risks and secure steady returns over time.
In conclusion, Wolfspeed's stock price has plummeted following the release of its first quarter fiscal 2025 financial results and outlook. The company's weaker-than-expected sales, gloomy outlook, and job cuts have raised concerns among investors. However, Wolfspeed's long-term strategy and commitment to innovation may present opportunities for investors who are willing to navigate the short-term challenges. By maintaining a diversified portfolio and focusing on income-generating investments, investors can secure steady returns and weather market fluctuations.