What is Happening to Wolfspeed’s Stock Price (NYSE: WOLF)

Wolfspeed's stock (NYSE:WOLF) plunged 51.86% during Friday's trading session, closing at a multi-decade low of $2.59 on exceptionally high volume of 175.9 million shares, significantly above its average of 22.7 million. This rather dramatic day brings the stock's loss over the past 12 months to 91.34%, causing plenty of concern amongst holders and markets alike.

The company seems to be facing a significant number off financial headwinds. Foremost among markets' concerns is the mounting uncertainty surrounding anticipated federal funding under the CHIPS and Science Act.

While Wolfspeed previously announced a non-binding preliminary agreement for potentially significant government support, viewed as vital for its ambitious capital expenditure plans including a major SiC facility in North Carolina, the finalisation and disbursement of these funds now appear less certain. This funding is crucial for Wolfspeed to scale production and meet the burgeoning demand for its SiC components, particularly within the electric vehicle (EV) and renewable energy sectors.

The company has stated communications with the Commerce Department remain “constructive,” but the lack of a definitive agreement weighs heavily on market sentiment.

Compounding these funding worries is the imminent challenge of refinancing $575 million in convertible bonds due in 2026. With Wolfspeed's stock price currently trading drastically below the reported conversion price of $47.32, converting this debt into equity is presently unfeasible. Reports suggest the company is actively engaged with advisors and potentially key investors to restructure this debt, but the severely depressed share price complicates these negotiations significantly.

Despite this financial turbulence, Wolfspeed's management sought to reassure the market by reaffirming its revenue guidance for the third quarter of fiscal year 2025, projecting between $170 million and $200 million.

Furthermore, the company announced the receipt of $192.1 million in cash tax refunds related to advanced manufacturing investment tax credits under the CHIPS Act, bolstering its projected cash balance to approximately $1.3 billion by the end of Q3. This provides a needed, albeit potentially temporary, liquidity cushion.

Operationally, the company managed to beat analyst estimates for revenue and adjusted earnings per share (EPS) in its most recently reported quarter (Q2 FY2025), though it missed on GAAP EPS and continues to project substantial GAAP net losses ($270M-$295M) for the upcoming quarter. Ongoing challenges include managing underutilization costs at its manufacturing facilities.

🟩 What is the Bull Case

• Strategic Market Position: Wolfspeed is a leader in SiC technology, essential for rapidly expanding markets like Electric Vehicles, 5G infrastructure, and Renewable Energy systems.
• Secular Growth Driver: The fundamental demand for SiC components is projected to experience significant long-term growth as these power-efficient technologies gain adoption.
• Deep Value Potential: The stock's collapse to multi-decade lows presents a potentially attractive entry point, offering substantial upside if current financial hurdles are overcome.
• Catalyst Potential: Successful resolution of CHIPS Act funding uncertainties and a favorable refinancing agreement for the convertible bonds could dramatically de-risk the company and trigger a significant stock rebound.
• Leadership Transition: An experienced incoming CEO may provide fresh strategic direction and execution focus needed to navigate the current challenges.
• Liquidity Boost: The recent $192.1M tax refund provides crucial near-term cash, with potential for further significant refunds enhancing liquidity.

🟥 What is the Bear Case

• Crippling Debt Pressure: Intense uncertainty surrounds the refinancing of $575M in convertible debt due 2026, with the extremely low stock price making equity conversion non-viable and complicating restructuring efforts.
• CHIPS Funding Risk: Failure to secure the anticipated level of CHIPS Act direct funding could severely hamper expansion plans and necessitate major strategic pivots or further capital raises under duress.
• Persistent Losses & Cash Burn: The company continues to generate significant GAAP losses and faces challenges achieving profitability and positive free cash flow, despite revenue growth and cost-cutting measures.
• Execution & Ramp-Up Challenges: Effectively scaling production, particularly at new facilities like Siler City, and addressing manufacturing inefficiencies (e.g., underutilization costs) remain critical operational risks.
• Overwhelming Negative Sentiment: Extreme negative market sentiment, technical indicators signaling “Sell,” and the stock hitting multi-decade lows indicate strong downward momentum and investor flight.
• High Leverage: The company operates with a substantial debt load, increasing financial risk during a period of heavy investment and operational uncertainty.

The bull and bear cases for Wolfspeed in many instances pivot around similar points, with alternating results. With many factors not yet clear, there is likely to be significant volatility continuing here.