Today's significant drop in Wolfspeed's stock value might be explained.
Wolfspeed's (WOLF -7.01%) stock is taking a dive in today's trading sessions, following the release of its latest quarterly report. As of 1 p.m. ET, the company's share price had dropped an alarming 33.2%.
Yesterday, after market close, Wolfspeed disclosed its earnings for the first quarter of its current fiscal year, which concluded on September 29. Despite posting a smaller than expected loss for the quarter, the company's sales and future projections failed to meet the expectations set by Wall Street analysts.
Wolfspeed's sales underperforming during a significant restructuring phase
Wolfspeed reported a non-GAAP (standard accounting principles) adjusted loss of $0.91 per share, on revenue of $194.7 million. In contrast, analysts had predicted a loss of $1 per share, with revenue expected to reach around $200.4 million. The revenue figure for the quarter decreased by approximately 1.4% compared to the same period the previous year.
Simultaneously, the company recorded a net loss of $282.2 million for the period. A significant portion of this loss, $87.1 million, stemmed from restructuring charges associated with the shuttering of one of its factories. Management predicts that an additional $174 million in restructuring costs will be incurred in the current quarter. Additionally, the company announced plans to reduce its workforce by roughly 20%.
What looms for Wolfspeed?
For the current fiscal year's second quarter, Wolfspeed has set expectations for sales to range between $160 million and $200 million. This projection falls significantly below the $214.6 million that analysts had anticipated.
The company has also established an adjusted loss forecast between $0.89 and $1.14 per share for the second quarter. These projections are substantially worse than the $0.91 per share in adjusted loss that analysts had anticipated.
Since the beginning of this year, Wolfspeed's stock has dropped approximately 79% in trading. Currently, the company is valued at just 1.3 times its anticipated sales for the year. While it seems set to receive additional funding through the CHIPS Act, and appears to be undervalued by certain metrics, the company's future competitiveness and sales and earnings outlooks are facing scrutiny following the recent quarterly report.
In light of the underperforming sales and disappointing projections, investors might be reconsidering their finance strategies towards Wolfspeed, potentially leading to a decrease in funding. With the company's shares continuing to depreciate in value, some individuals may choose to hold off on investing until the financial situation improves.
Despite the current financial challenges, Wolfspeed's executives are committed to reducing costs by closing a factory and downsizing their workforce, hoping to boost their profitability in the future. This strategic decision could be seen as a move to shore up their money reserves and improve their financial standing, making it an interesting opportunity for some investors with a long-term focus on finance.
