Wolfspeed (NYSE:WOLF) reported its third-quarter financial results after the close Wednesday, with earnings slightly surpassing analysts' expectations while meeting revenue estimates. However, the semiconductor company's stock fell sharply by 8.5% due to its fourth-quarter guidance falling short of Wall Street forecasts.
The company posted an adjusted loss per share of -$0.62, marginally better than the analyst estimate of -$0.63. Revenue was essentially in line with expectations at $201 million, compared to the consensus estimate of $201.15 million. This represents an increase from the $193 million reported in the same quarter last year.
Wolfspeed's CEO, Gregg Lowe, highlighted the company's operational milestones, noting the significant revenue contribution from the Mohawk Valley Fab and the second highest quarter on record for materials revenue. Despite general demand weakness in electric vehicles (EVs), Lowe stated, "We still have more demand than we can supply for the foreseeable future," underscoring the company's robust design-win pipeline.
Looking ahead, the company provided guidance for the fourth quarter of fiscal 2024, projecting revenue between $185 million and $215 million and an adjusted net loss per share in the range of -$0.72 to -$0.86. This outlook is notably below the consensus estimates, which anticipated a smaller loss of -$0.61 per share on higher revenue of $225.8 million.
The disappointing guidance reflects the challenges Wolfspeed faces, including substantial factory start-up and underutilization costs, which have impacted margins. In the third quarter, the company incurred $14.4 million in start-up costs and $30.4 million in underutilization costs, which are expected to continue as the company ramps up its production facilities.
Despite the near-term headwinds, Lowe expressed confidence in the company's long-term growth trajectory, citing the electrification trend across various applications. "While the industrial and energy end markets pose short-term headwinds to our results, we firmly believe in the strength of our long-term prospects," he said.
Investors reacted negatively to the guidance miss, with the stock experiencing a significant drop in after-hours trading. As the company continues its expansion efforts, particularly with the Mohawk Valley Fab and the materials expansion in North Carolina, the market will be closely watching Wolfspeed's ability to scale up production and meet the growing demand for its silicon carbide solutions.
Following the report, analysts at Morgan Stanley lowered their price target for WOLF to $26 from $27 per share, maintaining an Equal-weight rating on the stock.
"Wolfspeed guided JuneQ below consensus and lowered near-term expectations, but we see prioritization of near-term ramps and putting conditions on greenfield investments as a positive," said the firm.