When Will Wolfspeed, Inc. (NYSE:WOLF) Turn A Profit?
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. On 27 June 2021, the US$11b market-cap company posted a loss of US$341m for its most recent financial year. Many investors are wondering about the rate at which Wolfspeed will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
See our latest analysis for Wolfspeed
According to the 16 industry analysts covering Wolfspeed, the consensus is that breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of US$70m in 2024. The company is therefore projected to breakeven around 3 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 67%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Wolfspeed given that this is a high-level summary, but, take into account 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’d like to point out is that The company has managed its capital judiciously, with debt making up 39% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Wolfspeed, so if you are interested in understanding the company at a deeper level, take a look at Wolfspeed's company page on Simply Wall St. We've also put together a list of essential aspects you should look at:
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.
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.
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