We came across a bullish thesis on Wolfspeed, Inc. (WOLF) on Substack by LongYield. In this article, we will summarize the bulls’ thesis on WOLF. Wolfspeed, Inc. (WOLF)’s share was trading at $3.34 as of May 12th.
A fleet of electric light vehicles recharging their batteries in a parking lot.
Wolfspeed, Inc. is undergoing a critical transitional phase marked by both operational transformation and financial restructuring as it positions itself to lead in the silicon carbide (SiC) semiconductor market. In its Q3 2025 results, the company reported revenue of $185.4 million, reflecting a modest 2.2% sequential growth but a 7.6% year-over-year decline, narrowly missing analyst estimates. The revenue split shows a growing contribution from power products, which brought in $107 million, largely fueled by automotive sector demand, while materials revenue surged to $78 million, a 50% sequential and 175% year-over-year increase thanks to the scaling of the Mohawk Valley fab. Despite these advances, the company’s non-GAAP gross margin remained extremely thin at 2.2%, and its adjusted EPS loss of $0.72, while better than consensus estimates, underscores the company’s ongoing struggles with profitability. Free cash flow was negative $168 million, a function of operational outflows and capital expenditures, though partially offset by $192 million in tax refunds. Wolfspeed ended the quarter with $1.3 billion in cash but carried a significant debt load of $3.47 billion, further pressuring its balance sheet.
Central to Wolfspeed’s turnaround efforts is the ramp-up of its Mohawk Valley facility, which recently achieved a conditional certificate of occupancy and is expected to be fully operational by June 2025. This fab represents the company’s pivot to 200-millimeter wafer production, a move that promises to improve yields, reduce costs, and expand margins over time. Concurrently, Wolfspeed is shuttering its legacy 150-millimeter operations, with the Farmers Branch site already closed and the Durham facility slated for closure in 2025. These strategic shifts are designed to streamline the company’s cost base and better align its manufacturing capabilities with anticipated demand from high-growth markets like EVs, AI data centers, and aerospace applications.
New CEO Robert Feurle has initiated a leadership overhaul to sharpen execution and refocus strategy, appointing a new COO, Chief Business Officer, and global SVP of Sales and Marketing. Feurle’s mandate is clear: stabilize operations and realign Wolfspeed’s financial and strategic resources toward long-term value creation. The company is also actively engaging with the Trump administration in pursuit of CHIPS Act funding, which, if secured, could serve as a major catalyst for both liquidity and credibility in Wolfspeed’s mission to establish itself as a cornerstone of U.S. semiconductor independence. However, these discussions remain fluid, and their outcomes are not guaranteed, introducing a key layer of uncertainty to the investment thesis.
To address its significant debt burden and cash burn, Wolfspeed has launched a multi-pronged restructuring plan. This includes monetizing non-core assets worth $150 million, securing over $600 million in expected tax refunds, and pursuing negotiations with lenders to realign the capital structure. The company is also targeting $200 million in annualized cost savings and aims to reduce its EBITDA breakeven threshold to $800 million in annual revenue, paving the way toward positive free cash flow by fiscal 2026. While these plans are constructive, their success is heavily dependent on execution, particularly as the company navigates the intricacies of asset divestitures and creditor agreements.
Board-level changes have further signaled Wolfspeed’s intent to steer toward financial discipline. The additions of Mark Jensen and Paul V. Walsh, Jr. to the Board and Audit Committee bring crucial expertise in corporate restructuring and semiconductor finance, bolstering Wolfspeed’s oversight and lender engagement capabilities. Meanwhile, the planned departure of CFO Neill Reynolds by the end of May 2025 introduces some near-term uncertainty around continuity in financial strategy, especially as the company conducts a search for his replacement.
Despite beating EPS expectations, Wolfspeed’s stock fell sharply by 11% in extended trading following the Q3 earnings release. The market reacted negatively to the tepid revenue growth and fiscal 2026 guidance of $850 million, which fell significantly short of consensus expectations of $958.7 million. As of May 8, 2025, the stock was trading at $4.47, reflecting investor skepticism over Wolfspeed’s near-term outlook and ability to overcome macroeconomic and operational headwinds. Slower-than-expected EV adoption, rising component tariffs, high interest rates, and delayed capital expenditures in industrial and energy markets continue to weigh on sentiment. Competitive pressure from lower-cost Chinese SiC manufacturers and delays in ramping up the Mohawk Valley fab further complicate the landscape.
Nonetheless, Wolfspeed’s underlying story remains one of high-stakes transformation. With a differentiated technology platform in a fast-growing end market, robust liquidity through anticipated tax refunds, and an increasingly focused management team, the company could unlock significant value if it can execute its strategic plan. While current challenges remain formidable, especially around cash flow and debt, the longer-term opportunity in SiC power semiconductors—driven by EVs, energy infrastructure, and AI—positions Wolfspeed as a high-risk, high-reward investment with multiple potential catalysts ahead.
Wolfspeed, Inc. (WOLF) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held WOLF at the end of the fourth quarter which was 26 in the previous quarter. While we acknowledge the risk and potential of WOLF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WOLF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
