Wolfspeed Shares Plunge 52% After $192 Million Tax Refund, Company Reaffirms Q3 Guidance
Wolfspeed (WOLF, Financials) shares dropped 52.2% to $2.57 as of Friday afternoon after the company disclosed it had received $192.1 million in tax refunds under the Section 48D advanced manufacturing credit and reaffirmed its third-quarter fiscal 2025 guidance. The funds are earmarked to improve the company's capital structure.
Warning! GuruFocus has detected 9 Warning Signs with WOLF.
The company said that the return includes interest that has built up and $186.5 million from fiscal years 2023 and 2024. This payment is part of the total returns Wolfspeed plans to get from the government tax credit scheme, which is about $1 billion. In fiscal year 2026, more than $600 million should come in. The company wants to use the money to improve its capital structure and do other business-related things.Wolfspeed thinks that it will have about $1.3 billion in cash on hand at the end of this fiscal quarter, which includes the return.The chip company in Durham, North Carolina, kept its sales estimate for the third quarter at between $170 million and $200 million, with a non-GAAP gross margin of between 3% and 7%. GAAP says that the net losses will be between $270 million and $295 million, or $1.73 to $1.89 per common share. The company expects to lose between $119 million and $138 million, or $0.76 to $0.88 per share, in non-GAAP net income.Wolfspeed also repeated the advice it had already given for fiscal years 2026 and 2027, which included spending between $150 million and $200 million on capital projects and between $30 million and $50 million on those projects, respectively. It wants to reach adjusted EBITDA break-even at $800 million in annual sales, after working to make operations simpler and closing its manufacturing plant in North Carolina.The business expects $200 million in operating cash flow that isn't tied to debt in fiscal year 2026 and positive leveraged free cash flow in fiscal year 2027, assuming that refinance deals go well.Management said that talks about its convertible debt are still going on with lenders like Apollo and Renesas. They are also talking to the U.S. Department of Commerce and other federal stakeholders to get support for bringing semiconductor manufacturing back to the U.S. and increasing the number of wafers that can be made in the U.S.Wolfspeed makes silicon carbide chips that are used in electric cars and power gadgets. The company is also getting ready to grow its U.S. manufacturing, which is in line with government industrial policy goals.
This article first appeared on GuruFocus.
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