A month has gone by since the last earnings report for Wolfspeed (WOLF Quick QuoteWOLF - Free Report) . Shares have added about 10.1% in that time frame, outperforming the S&P 500.

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

Wolfspeed Reports Loss in Q3 Earnings, Revenues Up Y/Y

Wolfspeed reported a third-quarter fiscal 2024 non-GAAP loss of 62 cents per share, narrower than the Zacks Consensus Estimate of a loss of 64 cents per share but broader than the year-ago quarter’s loss of 34 cents per share.

Revenues of $200.7 million increased 4.2% year over year but lagged the consensus mark by 0.39%. Mohawk Valley Fab contributed $28 million in revenues in the reported quarter.

Power Products accounted for 50.9%, while Materials Products contributed 49.1%. Power Products revenues increased 0.5% year over year to $102.1 million. Materials Products revenues increased 8.4% year over year to $98.6 million.

Power device design-ins were $2.8 billion in the reported quarter. Quarterly design wins were $0.9 billion, with 70% related to automotive applications.

Operating Details

In the fiscal third quarter, Wolfspeed reported a non-GAAP gross margin of 15%, down from 33.9% reported in the year-ago quarter.

In the reported quarter, sales, general and administrative expenses were $55.8 million (27.8% of total revenues), up 1.3% year over year.

Research & development expenses (26.2% of total revenues) increased 23.8% year over year to $52.5 million.

Wolfspeed incurred $14.4 million of factory start-up costs and $30.4 million of underutilization costs in the third quarter of fiscal 2024.

The company incurred a non-GAAP operating loss of $79 million, wider than the operating loss of $66.6 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2024, WOLF had cash, cash equivalents and short-term investments of $2.55 billion compared with $2.64 billion as of Dec 31, 2023.

Free cash outflow was $616 million, comprising $136 million of operating cash outflow and $480 million of capital expenditures.

Guidance

For fourth-quarter fiscal 2024, Wolfspeed expects revenues in the range of $185-$215 million. Non-GAAP loss is expected to be 72-86 cents per share.

The company expects Mohawk Valley fab to contribute nearly $40-$50 million in revenues in the fourth quarter of fiscal 2024.

It expects non-GAAP gross margin in the range of 8-16%. Non-GAAP operating expenses are expected between $116 million and $122 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -21.14% due to these changes.

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 fifth 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. It's no surprise Wolfspeed has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.