Facing the Fiscal Fire
In the third quarter of fiscal 2024, Wolfspeed (WOLF) reported a non-GAAP loss of 62 cents per share, beating estimates but wider than the previous year. Revenues stood at $200.7 million, showing a 4.2% increase year over year but slightly below expectations. The Mohawk Valley Fab added $28 million to the revenue pool, with Power Products and Materials Products contributing 50.9% and 49.1% respectively. While the former saw a modest uptick, the latter observed a more substantial 8.4% year-over-year growth.
Riding the Operational Waves
The operating stats reveal a less stellar sight for Wolfspeed. Non-GAAP gross margin dropped to 15% from 33.9% in the previous year. Sales, general, and administrative expenses totaled $55.8 million, representing 27.8% of total revenues. Research & development expenses surged by 23.8% year over year to $52.5 million. The company also grappled with factory start-up costs of $14.4 million and underutilization costs of $30.4 million in the third quarter.
Cash Flow and Future Fortunes
As of March 31, 2024, Wolfspeed had $2.55 billion in cash, cash equivalents, and short-term investments. However, the company faced a free cash outflow of $616 million, largely due to heavy capital expenditures. Looking ahead, Wolfspeed expects fourth-quarter revenues ranging from $185 to $215 million. The non-GAAP loss is forecasted to be between 72 to 86 cents per share, with hopes pinned on the Mohawk Valley fab to contribute significantly to the revenue stream.
The Zacks Conundrum
Despite its challenges, Wolfspeed still stands at a Zacks Rank #3 (Hold). For investors eyeing alternative options, Arista Networks, AMETEK, and NVIDIA present more promising prospects with higher Zacks Ranks. Arista Networks is currently a Zacks Rank #1 (Strong Buy), while AMETEK and NVIDIA hold Zacks Rank #2 (Buy) each. Arista Networks, in particular, has seen an 8.3% increase in shares year to date, with upcoming financial results scheduled for May 7.