Wolfspeed Stock Collapses: Here's What J.P. Morgan Says About the Road to Bankruptcy
Wolfspeed (NYSE:WOLF) investors faced a harsh reality on Wednesday as the company's stock plummeted nearly 70%. This collapse followed reports that the silicon carbide chipmaker is preparing to file for Chapter 11 bankruptcy within weeks.
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Earlier this month, Wolfspeed said that it was exploring options to either restructure its debt or pursue bankruptcy. The company carries $6.5 billion in debt and had $1.3 billion in cash as of March 31. Wolfspeed has been struggling with weak demand in the industrial and automotive sectors, along with uncertainty caused by tariffs.
The company was awarded $750 million in direct funding through the CHIPS Act. However, it has yet to receive the funds, and speculation emerged in March that it may have lost access to the anticipated cash infusion. Also in March, Wolfspeed announced it would lay off around 180 employees, mainly from its materials operations in Durham and Siler City and the company named Robert Feurle as its new CEO, effective May 1. That has done little to change its fortunes, it seems.
Given the challenges faced by the company, the news probably won't come as much of a surprise to J.P. Morgan's Samik Chatterjee, an analyst who ranks amongst the top 4% of Wall Street stock pros.
'In our view, further evidence of demand headwinds amid an uncertain macro (e.g., auto-related tariffs, risks to CHIPS Act funding, risks to EV policies, etc.), higher competition, and significant changes in the management team creates a challenging path for the company to achieve its target of generating positive operating cash flow in FY26 (Jun-end),' Chatterjee explained.
'Even though the management team has already taken incremental actions to reduce its prior EBITDA breakeven point given the current status of demand (e.g., $800 mn vs. prior of <$1 billion), we believe the above outlined headwinds are setting the stage for lower confidence in its stated outlook for breakeven and greater challenges in relation to convincing equity investors that there remains a path to profitability,' the 5-star analyst added.
It's no wonder, then, that Chatterjee rates WOLF shares as Underweight (i.e., Sell). (To watch Chatterjee's track record, click here)
Other Street analysts will likely soon be joining Chatterjee in the bear camp. In the meantime, the stock claims a Hold (i.e., Neutral) consensus rating based on a mix of 3 Buys, 2 Holds and 4 Sells. (See WOLF stock forecast)
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