Wolfspeed At A Crossroads: Analyst Points To Competitive Pressures, EV Slowdown Impact

Mizuho analyst Vijay Rakesh initiated coverage on Wolfspeed Inc WOLF with a Neutral rating and a price target of $30.

Wolfspeed, a global leader in the Silicon Carbide (SiC) substrate wafer and device market, plays a pivotal role in shaping the future of automotive and renewable energy industries with its cutting-edge technology, Rakesh noted. As a pure-play SiC supplier, Wolfspeed is at the forefront of high power management, which is crucial for automotive electrification and renewable energy solutions, per the analyst. 

Despite leading the market, Wolfspeed faces potential challenges from increasing domestic and international competition, particularly with the SiC Total Addressable Market (TAM) expected to grow at a Compound Annual Growth Rate (CAGR) of approximately 30%. He noted that this competition, coupled with a decelerating Electric Vehicle (EV) market, could impact supply, pricing, and margins.

SiC technology, known for its high voltage endurance and efficiency, is essential for distributing power in EVs and renewable energy systems. Wolfspeed’s significant share of approximately 53% in the global SiC substrate wafers market and its partnerships with almost all major chip OEMs position it as a critical player, as per Kumar. However, profitability challenges loom as all SiC suppliers expand capacity, and SiC chip supply will likely outpace EV growth significantly.

Moreover, he added that the push for domestic SiC production in China and the qualification of cheaper Chinese SiC suppliers by major chip OEMs may further pressure prices and lead to oversupply issues.

While near-to-mid-term gross margins at Wolfspeed could improve, the long-term outlook suggests pricing pressures and margin challenges due to increased competition and capacity expansions, especially in the face of slowing EV demand, as per Kumar.

Kumar projected third-quarter revenue and EPS of $200.1 million and $(0.63).

Wolfspeed stock lost over 54% in value in the last 12 months. Investors can gain exposure to the stock via SPDR S&P Semiconductor ETF XSD and Amplify ETF Trust Amplify AI Powered Equity ETF AIEQ.

Price Action: WOLF shares traded lower by 1.63% at $26.63 at last check Friday.

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