Citi analyst Atif Malik maintained a Hold rating on Wolfspeed (WOLF – Research Report) today and set a price target of $25.00.
Atif Malik has given his Hold rating due to a combination of factors affecting Wolfspeed’s recent performance and future prospects. While Malik acknowledges the progress at the Mohawk Valley Fabrication plant, which is expected to reach significant utilization and sales milestones by the end of 2024, the immediate concerns include a miss on margins for the March quarter, coupled with lower-than-anticipated sales and gross margin guidance for the June quarter. These issues are primarily attributed to industrial and energy sector weaknesses, particularly in China, and are compounded by increased competition that could pose long-term pricing risks.
Furthermore, the reduction in Wolfspeed’s target price from $29 to $25 reflects adjustments in earnings expectations due to lower sales forecasts in the Durham facility, considering the current slump in the industrial and energy markets. The new target price is based on a discounted future earnings model, applying a price-to-earnings ratio consistent with peers in the Silicon Carbide (SiC) market. Despite the potential support for the stock price provided by stakeholder activism, as noted in the Jana letter, the near-term outlook is marred by underperformance in key financial metrics, leading to a tempered expectation for the company’s stock in the immediate future.
In another report released today, TD Cowen also downgraded the stock to a Hold with a $25.00 price target.
Based on the recent corporate insider activity of 33 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of WOLF in relation to earlier this year.
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Wolfspeed (WOLF) Company Description:
Cree, Inc. is a manufacturer of lighting-class light emitting diode (LED) products, lighting products and semiconductor products for power and radio-frequency (RF) applications. It operates through the following segments: Wolfspeed, LED Products, and Lighting Products. The Wolfspeed segment products consists of silicon carbide (SiC) and gallium nitride (GaN) materials, power devices and RF devices based on silicon (Si) and wide bandgap semiconductor materials. The LED Products segment includes LED chips, LED components and SiC materials. The Lighting Products segment consists of LED lighting systems and bulbs for the commercial, industrial and consumer markets. The Power and RF Products segment includes power devices and RF devices. The company was founded by Calvin H. Carter Jr., John W. Palmour, F. Neal Hunter, Eric Hunter, and John Edmond in 1987 and is headquartered in Durham, NC.
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