Wolfspeed Faces Challenges Amid Declining Revenue Growth

Wolfspeed's stock has lost over 90% of its value, raising concerns. Analysts predict a decline in revenue along with escalating losses, making it a cautious investment prospect.

Date: 01-01-2025

AI Rating: 5

Revenue Growth Overview
Wolfspeed has experienced significant fluctuations in revenue growth over recent years, with a CAGR of 8% from fiscal 2019 to fiscal 2024. Analyzing their revenue figures shows they faced a downturn in FY 2020 with a (16%) decrease, but enjoyed a rebound in the following years. However, the growth rate witnessed a stark decline in FY 2024, with an expected revenue of $807 million and a projected 2% decline in FY 2025 to $790 million.

Gross Margin Concerns
The company's adjusted gross margin saw erosion, dropping from 36% in FY 2022 to a concerning 13% in FY 2024. This decrease indicates a troubling shift in profitability that confirms the struggles Wolfspeed is facing in maintaining its margins amid rising competition and operational challenges.

Net Income Challenges
The net loss reported by Wolfspeed widened significantly, moving from $330 million to $864 million in FY 2024. The anticipated further widening of losses to $975 million in FY 2025 coupled with a high debt-to-equity ratio of 10.2 raises significant red flags about the financial health of the company.

Market Position & Future Prospects
Although Wolfspeed is positioned as a leader in the SiC chip market, the combination of increased competition, including from larger companies like Infineon and On Semiconductor, and the overall cooling of the EV market poses serious threats. The anticipated revenue increase of 49% in FY 2026 to $1.17 billion comes with skepticism due to these ongoing risks. Investors are urged to remain cautious until they see clear stabilization in sales and an improvement in losses.

Stocks: WOLF ON INFN