Continuing losses, will Wolfspeed be sold?

Wolfspeed (WOLF.N) released its financial report for the fourth quarter of the 2024 fiscal year (ending in June 2024) after the U.S. stock market on the early morning of August 22, 2024 Beijing time, with the following key points:

1. Revenue: In the fourth quarter of the 2024 fiscal year (Q2 24), Wolfspeed achieved a revenue of $200 million, a year-on-year decrease of 14.9%, which is basically in line with market expectations ($201 million). The decline in revenue was mainly due to insufficient industry demand.

2. Gross Profit: In the fourth quarter of the 2024 fiscal year (Q2 24), Wolfspeed achieved a gross profit of $0.02 billion, a year-on-year decrease of 96.3%, mainly affected by the gross profit margin. The company's gross profit margin for this quarter was only 1.2%, hitting a historical low, mainly due to the increased costs from underutilization of the new factory.

3. Operating Expenses: In the fourth quarter of the 2024 fiscal year (Q2 24), Wolfspeed's operating expenses reached $122 million, a year-on-year increase of 0.3%. Despite the pressure on operations, the company's investment in research and development, sales, and other expenses has been steadily increasing.

4. Net Profit: Wolfspeed's net loss (GAAP) in the fourth quarter of the 2024 fiscal year (Q2 24) further expanded to $175 million, close to market expectations (-$176 million). The decline in the company's profit this quarter was mainly due to the sharp drop in gross profit margin, and the underutilization of the new factory further expanded the losses.

5. Guidance for the Next Quarter: Wolfspeed's revenue guidance for the first quarter of the 2025 fiscal year (Q3 24) is $185-215 million, below market expectations ($220 million). The company's net loss (GAAP) target is $194-226 million, falling short of market expectations (net loss of $145 million).

Dolphin's Overall View:

Wolfspeed's financial report for this quarter is relatively average. Both quarterly revenue and profit are close to market expectations. The decline in the company's gross profit margin was influenced by product market demand and insufficient capacity utilization. The price war in the current new energy vehicle sector directly impacted the demand for SiC in the market, leading to the company's profitability not improving.

Considering the company's guidance for the next quarter: The company's revenue guidance for the next quarter is $185-215 million, with a wide range and below market expectations ($220 million). The company's net loss (GAAP) target for the next quarter is $194-226 million, falling short of market expectations (net loss of $145 million), further expanding the losses.

The company still faces significant pressure on its operations, with limited revenue growth and an increasing loss magnitude. This is mainly because the company misjudged the entire SiC market, and the newly expanded factory not only failed to boost performance but also increased costs for the company In the current quarter's nearly $200 million loss, the losses from the new factory amount to nearly $50 million ($25 million for factory start-up costs and $24 million for underutilization costs).

Dolphin believes that the company's current operations are still not good, but changes can also be seen in this financial report: ① This quarter, the company's utilization rate in Mohawk Valley reached 20%. With the improvement in the utilization rate of the new factory, even though it cannot yet turn losses into profits, it can to some extent alleviate the pressure of the company's losses; ② Under continued losses, management has decided to reduce the capital expenditure plan for the 2025 fiscal year by $200 million.

As the previous SiC boom fades and the company's stock price continues to decline, there were rumors of a potential acquisition at one point. The company's operations have been in continuous losses, directly affecting investor confidence. The company's overall market value has now fallen to $1.7 billion, with a PB ratio also dropping to around 1.6 times. After all, the company still has a relatively leading SiC wafer factory. If the company's business and related markets show significant improvement, it still holds a certain value with bargaining elasticity.

Here are Dolphin's specific data on $Wayfair(W.US)olfspeed.US:

Dolphin's Research on Wolfspeed

Financial Reports

October 31, 2023 Financial Report Review "Wolfspeed: Electric Vehicle Price War, Is Silicon Carbide the Sacrificial Lamb?"

August 17, 2023 Conference Call "With Expansion, Profitability is Still Distant (Wolfspeed FY4Q23 Conference Call)" 2023 August 17 Financial Report Review "Wolfspeed: Silicon Carbide, the 'High Growth' Label Stripped Off"

2023 April 27 Financial Report Review "Wolfspeed: Another Hundred Million Loss, Tesla Takes Down the SiC King"

2023 January 26 Financial Report Review "Wolfspeed: Gem in Power, Silicon Carbide Falling from Grace?"

2022 October 27 Financial Report Review "Wolfspeed: Targeting Short-term Performance or Long-term Silicon Carbide Faith?"

In-depth

2022 September 23 "Wolfspeed: Hard Currency in Silicon Carbide, Being Too Expensive is the 'Original Sin'"

2022 September 15 "Wolfspeed: Tesla's Ignited Hidden 'Hard Currency'"

Live Broadcast

2023 April 27 "Wolfspeed, Inc. 2023 Fiscal Year Q3 Earnings Conference Call"

2023 January 26 "Wolfspeed, Inc. 2023 Fiscal Year Q2 Earnings Conference Call"

Risk Disclosure and Statement of this Article: Dolphin Research Disclaimer and General Disclosure