Wolfspeed is the IBD Stock Of The Day as the chipmaker approaches a buy point after getting another ringing endorsement from a Wall Street firm. Wolfspeed stock advanced on Tuesday.
On the stock market today, Wolfspeed stock rose 2.6% to 112.63.
Earlier Tuesday, Piper Sandler analyst Harsh Kumar reiterated his overweight, or buy, rating on Wolfspeed stock after he met with the company's management. He has a price target of 130 on Wolfspeed stock.
"We remain impressed by Wolfspeed's positioning in the silicon carbide market, which continues to expand as more use cases come online," Kumar said in a note to clients. "Given their plans to increase capacity, we believe Wolfspeed can capitalize on the tremendous market opportunities in EVs (electric vehicles) and the broader industrial space."
Making Power Chips For EVs
Durham, N.C.-based Wolfspeed makes silicon carbide wafers and chips for power-switching and radio-frequency applications. Its chips are designed for electric vehicles, telecom, aerospace and other markets. Silicon carbide has superior properties vs. traditional silicon in chips for high-voltage applications.
For electric vehicles, silicon carbide chips deliver faster charging and longer driving ranges.
"Demand for the company's silicon carbide products continues to be strong, as design wins are ramping at a rapid pace," Kumar said. The company is severely supply constrained and can't meet current demand, he says.
Wolfspeed stock has formed a short consolidation pattern with a buy point of 123.35, based on IBD analysis. IBD profiled Wolfspeed in its latest New America article.
Wolfspeed currently isn't profitable because it's in investment mode. The company is building new factories to support the expected boom in silicon carbide chip demand.
Wolfspeed Stock: Profits Coming Soon
But analysts polled by FactSet predict Wolfspeed will turn profitable in the March quarter, its fiscal third quarter.
In its fiscal 2022 ended June 26, Wolfspeed lost an adjusted 50 cents a share on sales of $746.2 million. For the current fiscal 2023, Wall Street expects Wolfspeed to earn 16 cents a share on sales of $1.07 billion.
And for fiscal 2024, they forecast Wolfspeed earnings of $1.73 a share on sales of $1.52 billion.
Wolfspeed stock ranks fifth out of 31 stocks in IBD's Semiconductor Manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 85 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
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