It has been about a month since the last earnings report for Wolfspeed WOLF. Shares have lost about 31.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wolfspeed due for a breakout? 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 important drivers.

Wolfspeed Reports Loss in Q4 Earnings, Revenues Down Y/Y

Wolfspeed reported a fourth-quarter fiscal 2024 non-GAAP loss of 89 cents per share, wider than the Zacks Consensus Estimate of a loss of 84 cents per share but narrower than the year-ago quarter’s loss of 36 cents per share.

Revenues of $200.7 million decreased 1% year over year but lagged the consensus mark by 0.2%. Mohawk Valley Fab contributed $41 million in revenues in the reported quarter.

Power Products accounted for 52.1%, while Materials Products contributed 47.9%. Power Products revenues decreased 2.3% year over year to $104.6 million. Materials Products revenues increased 0.5% year over year to $96.1 million.

Power device design-ins were $2 billion in the reported quarter. Quarterly design wins were $0.5 billion.

Wolfspeed’s Operating Details

For the fiscal fourth quarter, Wolfspeed reported a non-GAAP gross margin of 5.4%, down from 30.7% reported in the year-ago quarter. Underutilization costs of $24 million negatively impacted gross margin in the reported quarter.

In the reported quarter, sales, general and administrative expenses were $60 million (29.9% of total revenues), up 37.6% year over year.

Research & development expenses (30.7% of total revenues) increased 4.8% year over year to $61.6 million.

Wolfspeed incurred $20.5 million in factory start-up costs in the fourth quarter of fiscal 2024.

The company incurred a non-GAAP operating loss of $118.9 million, wider than the operating loss of $66.8 million in the year-ago quarter.

WOLF’s Balance Sheet & Cash Flow

As of Jun 30, 2024, WOLF had cash, cash equivalents and short-term investments of $2.17 billion compared with $2.55 billion as of Mar 31, 2024.

Long-term debt was $3.13 billion as of Jun 30, 2024.

Free cash outflow was $885.3 million, comprising $239.5 million of operating cash outflow and $644.2 million of capital expenditures.

Guidance

For first-quarter fiscal 2025, Wolfspeed expects revenues in the range of $185-$215 million. Non-GAAP loss is expected between 90 cents and $1.09 per share.

The company expects Mohawk Valley Fab to contribute nearly $20-$30 million in revenues in the first quarter of fiscal 2025.

It expects non-GAAP gross margin in the range of 13-20%. Non-GAAP operating expenses are expected to be $109 million, including $13 million of start-up costs.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -11.14% due to these changes.

VGM Scores

At this time, Wolfspeed has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wolfspeed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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