Key Takeaways:
Wolfspeed (WOLF) shares surged 23% to $65.95 in pre-market trading after Citrini Research recommended the power-chip maker, citing its potential to benefit from the artificial intelligence boom.
The research firm’s memo, published Tuesday, highlighted that Wolfspeed’s power semiconductors are essential for controlling voltage flows and fulfilling the soaring energy demands of AI data centers.
The stock was up 209% for the year through Tuesday’s close, part of a broader rally in power-chip makers. Competitors like Navitas Semiconductor (NVTS) have also seen triple-digit gains this year as investors look for ways to play the AI infrastructure build-out.
Shares in Wolfspeed, which exited Chapter 11 bankruptcy in September, jumped on the new analysis. The recommendation puts a spotlight on the company’s role in the high-growth AI sector, even as it faces significant operational headwinds.
Despite the bullish sentiment from Citrini, Wolfspeed continues to face serious financial challenges. The company reported a negative gross margin of 27% in its fiscal third quarter, meaning it costs more to produce its silicon carbide components than it sells them for. Revenue in the quarter fell 19% year-over-year to $150.2 million.
The company is also burning through cash, with a negative operating cash flow of $84 million in the last quarter. Another analysis from 24/7 Wall St. rates the stock as a “Hold,” with a 12-month price target of $46.80, suggesting a 12.9% downside from current levels. Their conservative scenario places the stock as low as $26.86.
The conflicting analyses underscore a division on Wall Street. While some see a high-growth story tied to AI, others see a company struggling with profitability and execution. The stock’s performance hinges on whether it can resolve its production issues and capitalize on the AI data center market before its cash reserves are depleted. Investors will be closely watching the company’s next earnings report for signs of a turnaround in margins and revenue.
This article is for informational purposes only and does not constitute investment advice.
