A month has gone by since the last earnings report for Wolfspeed (WOLF Quick QuoteWOLF - Free Report) . Shares have lost about 7.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wolfspeed due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Wolfspeed Reports Loss in Q2 Earnings, Revenues Up Y/Y

Wolfspeed reported a second-quarter fiscal 2024 non-GAAP loss of 55 cents per share, broader than the year-ago quarter’s loss of 11 cents per share.

Revenues of $208.4 million increased 20% year over year. Mohawk Valley Fab contributed $12 million in revenues in the reported quarter.

Power Products accounted for 51.7%, while Materials Products contributed 48.3%. Power Products revenues increased 12.2% year over year to $107.7 million. Materials Products revenues increased 29.4% year over year to $100.7 million.

Power device design-ins were $2.1 billion in the reported quarter. Quarterly design wins were $2.9 billion, with more than 75% related to automotive applications.

Operating Details

In the fiscal second quarter, Wolfspeed reported a non-GAAP gross margin of 16.4%, down from 35.8% reported in the year-ago quarter.

In the reported quarter, sales, general and administrative expenses were $64.9 million (31.1% of total revenues), up 28.8% year over year.

Research & development expenses (21.7% of total revenues) increased 15% year over year to $45.3 million.

Wolfspeed incurred $10.5 million of factory start-up costs and $35.6 million of underutilization costs in the second quarter of fiscal 2024.

Wolfspeed incurred a non-GAAP operating loss of $70.8 million, wider than the operating loss of $35.9 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2023, WOLF had cash, cash equivalents and short-term investments of $2.64 billion compared with $3.35 billion as of Sep 24, 2023.

Free cash outflow was $755 million, comprising $183 million of operating cash outflow and $572 million of capital expenditures.

Guidance

For third-quarter fiscal 2024, Wolfspeed expects revenues in the range of $185-$215 million. Non-GAAP loss is expected to be 57-69 cents per share.

Revenues from materials are expected between $90 million and $95 million.

The company expects Mohawk Valley fab to contribute nearly $20-$30 million in revenues in the third quarter of fiscal 2024.

It expects non-GAAP gross margin in the range of 13-20%, with the midpoint of 16.5%. At the midpoint, this includes approximately $36 million of underutilization costs. Non-GAAP operating expenses of approximately $109 million are expected for the fiscal third quarter, including $13 million of start-up costs, primarily related to the JP materials facility in Siler City, NC.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Wolfspeed has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wolfspeed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.