Wolfspeed, Inc. (WOLF): A Bull Case Theory

We came across a bullish thesis on Wolfspeed, Inc. (WOLF) on wallstreetbets subreddit page by Moist-Clerk. In this article, we will summarize the bulls’ thesis on WOLF. Wolfspeed, Inc. share was trading at $16.21 as of Oct 17^th.

Wolfspeed Inc. (WOLF), formerly known as Cree Inc., has emerged as a significant player in the semiconductor industry, specializing in silicon carbide (SiC) and gallium nitride (GaN) technologies crucial for power electronics in electric vehicles (EVs), renewable energy, industrial power supplies, and 5G communications. Transitioning from its origins as an LED manufacturer to a dedicated SiC powerhouse, Wolfspeed aims to deliver high-performance products that enhance efficiency while reducing size and costs across various sectors. The company’s key offerings, including SiC power devices and RF devices, position it to capitalize on the growing EV market, where SiC technology is favored for its ability to enable faster charging and improved efficiency.

Wolfspeed is investing heavily in expanding production capacity, notably through its Mohawk Valley Fab in New York, which will become the largest SiC fabrication facility globally. Despite strong year-over-year revenue growth of approximately 36%, primarily driven by demand in EV and 5G sectors, the company continues to face challenges with profitability, as significant capital expenditures have led to a high cash burn rate. While gross margins have been improving, the bottom line remains in the red, raising concerns for investors. Analysts are divided, with short-term price targets ranging from $60 to $90 amid macroeconomic uncertainties, while long-term projections suggest a potential stock price exceeding $150 if the company successfully navigates production ramp-up and captures a larger market share. Despite competitive pressures, Wolfspeed’s strategic positioning in the burgeoning EV and renewable energy sectors presents a compelling investment opportunity with significant upside potential.

Wolfspeed, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held WOLF at the end of the second quarter which was 33 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.