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With the business potentially at an important milestone, we thought we'd take a closer look at Wolfspeed, Inc.'s (NYSE:WOLF) future prospects. Wolfspeed, Inc. provides silicon carbide and gallium nitride (GaN) materials, power devices, and radio frequency (RF) devices based on wide bandgap semiconductor materials and silicon. The US$8.2b market-cap company posted a loss in its most recent financial year of US$341m and a latest trailing-twelve-month loss of US$377m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Wolfspeed's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Consensus from 17 of the American Semiconductor analysts is that Wolfspeed is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$65m in 2024. The company is therefore projected to breakeven around 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 71% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Wolfspeed given that this is a high-level summary, however, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with Wolfspeed is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Wolfspeed's case is 42%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of Wolfspeed which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Wolfspeed, take a look at Wolfspeed's company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:
Valuation: What is Wolfspeed worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Wolfspeed is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Wolfspeed’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.