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On Friday, JPMorgan analysts downgraded Wolfspeed stock from Neutral to Underweight, citing a series of challenges that could impair investor confidence. The stock, currently trading at $4.43, has already declined 33.48% year-to-date, reflecting ongoing market concerns. The downgrade follows Wolfspeed’s third-quarter earnings report for fiscal year 2025, which ended in March, highlighting persistent headwinds for its Silicon Carbide (SiC) products. InvestingPro data reveals the company is quickly burning through cash, with negative EBITDA of $395.1 million in the last twelve months.
Wolfspeed’s earnings report revealed ongoing sluggish demand for Industrial & Energy (I&E) Devices and additional pressures in Materials. These factors are expected to potentially delay the ramp-up of the JP fab until market conditions for Materials improve. The analysts at JPMorgan pointed out that demand headwinds, uncertain macroeconomic factors, heightened competition, and significant changes in the management team present a difficult path for Wolfspeed to achieve its goal of generating positive operating cash flow by fiscal year 2026.
Despite the management’s efforts to reduce the EBITDA breakeven point from less than $1 billion to $800 million, JPMorgan believes that the outlined headwinds reduce confidence in the company’s financial outlook. The challenges also include complex negotiations with lenders, which now involve both in-court and out-of-court options, likely further eroding equity investors’ trust in the company’s stock.
As a result of these concerns, JPMorgan has lowered its revenue growth forecast for Wolfspeed, causing their out-year EBITDA estimates to fall below the company’s own projections. The analysts have expressed their decision to move to the sidelines, anticipating that the collective issues discussed will dampen equity investors’ interest in Wolfspeed shares, given the increasingly tough environment the company faces.
In other recent news, Wolfspeed Inc. (NYSE:WOLF) reported its third-quarter earnings for 2025, revealing an adjusted earnings per share (EPS) of -$0.72, surpassing analysts’ expectations of -$0.82. However, the company’s revenue came in at $185 million, slightly below the forecast of $185.66 million. Despite the EPS beat, the company did not provide guidance for the June quarter and refrained from taking questions during the earnings call. Citi analysts, led by Atif Malik, responded by reducing the price target for Wolfspeed shares from $7.00 to $3.00, while maintaining a Sell rating. The decision was influenced by Wolfspeed’s ongoing financial challenges, including persistent financial losses and high levels of debt, coupled with difficulties in obtaining funding through the CHIPS Act.
Wolfspeed also announced a 25% reduction in its workforce and the closure of certain manufacturing facilities to focus on 200mm silicon carbide manufacturing. These strategic shifts are part of the company’s broader efforts to cut costs and improve its capital structure. The company has been actively exploring both in-court and out-of-court restructuring options as part of its negotiations with lenders. Additionally, Wolfspeed is targeting an EBITDA breakeven point at $800 million by FY2026 and expects $600 million in tax credit refunds in the same fiscal year, which could bolster its financial position. Despite these efforts, the inclusion of a "going concern" risk in the company’s 8-K filing has raised doubts about its ability to continue operations in the future.
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