Wolfspeed's Stock Crash: Bargain or Bust?

Wolfspeed stock keeps hitting new lows as investors ask an important question. Is WOLF stock a good buy or a trap? We start by looking at the broader silicon carbide SiC thesis with a look at how China may become a major player with lots of SiC wafer production coming online. Then, we touch on the Tesla announcement of plans to cut back on silicon carbide usage in their electric vehicles, and how that may not matter all that much provided the costs of silicon carbide can fall enough to spur adoption. That brings us to the 8-inch wafer thesis which is what attracted investors to Wolfspeed stock in the first place. Well, that and the WOLF stock price which is just cratering, and the reason for that is poor execution. What key metrics should Wolfspeed investors watched? Glad you asked Johnny. That's in the video too which you need to go watch ASAP. Aight?
RESEARCH PIECES USED IN THIS VIDEO:
1. Is Wolfspeed Stock the Best Investment for EV Chips?
www.nanalyze.com/2024/02/wolf...
2. Wolfspeed Stock $WOLF Roars: EVs and More
• Wolfspeed Stock $WOLF ...
3. Wolfspeed Stock: A Bet on Electric Vehicles and More
www.nanalyze.com/2022/08/wolf...
4. Investing in Gallium Nitride and Silicon Carbide
www.nanalyze.com/2019/06/inve...
CHAPTERS:
00:55 Why silicon carbide is exciting
01:40 Why 8 inches matters
03:44 How China threatens Wolfspeed
05:01 Supply, demand, and Tesla
06:33 Why we wouldn't invest in STM
09:11 Wolfspeed's poor execution
12:13 Watch this WOLF metric closely
14:56 WOLF's gross margins
15:49 What's next?
ABOUT US:
This video is brought to you by Nanalyze, a media and research firm founded by finance professionals with decades of experience. We share insights about #DisruptiveTechnology #stocks in a language that is future-proof and easy to understand.
Read all the Nanalyze Premium articles you'd like for free! Sign up for a 30-day trial of our monthly subscription with no strings attached: www.nanalyze.com/become-a-nan...
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$wolf
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[@Nanalyze]

Be sure to subscribe here for more insightful videos on disruptive technologies: 👇 kzbin.info

[@vomma8466]

What a great presentation! I became aware of the company after watching a veritasium video. I have a small position short put 12.5 2 years out. Mostly because I find the risk reward interesting.

[@Nanalyze]

Really glad you enjoyed the presentation!

[@azulsimmons1040]

This video encompasses many reasons why I don't love commodity companies or companies relying on a particular commodity. You really have to understand that sector to make great money.

[@Nanalyze]

We're the same way. Commodities are subject to supply and demand from external forces so its always a roll of the dice as to where things are heading. Even worse are commodities that aren't traded on a visible exchange. Too much risk. Often requires market timing to generate alpha.

[@AceOnBase1]

Hey guys another knockout! Could you do a video on CFLT? Huge jump after earnings… I am concerned about their TAM though and I dont have the insight to make a judgement based on TAM, but its clear the company can execute.

[@Nanalyze]

We don't do updates for when stock prices increase because that's expected behavior. That said, we check in with companies once a year and its actually been a year now. The coming Confluent update will be an article for Premium subscribers instead of a video. But you can get read it anyway because everyone gets some free reads. ;) Joe P.

[@LDP..]

Great video ! What do you think of SMIC ? There is a risk of high costs in the future to try and beat tsmc , but seen their recent breakthroughs and the way the usa is pushing china in a corner when it comes to semiconductors i , i think this company will benefit from it ! Would love to see a video on that

[@Nanalyze]

That's an interesting thought. So a cursory search shows they're a "partially state-owned publicly listed Chinese pure-play semiconductor foundry company." Would need to look at things like where they trade (HK presumably?), the round lot issue for retail investors, the availability of investor materials, etc. A video like this usually takes a day to produce if everything goes well. This would need to be raised in our Discord server for the community to have a say ;) Very glad to hear you enjoyed the video and will keep SMIC in mind. Joe P.

[@dxiri]

ROHM seems like a safer (and good) bet. Good financial shape, trades close to book value and have been around for way longer.

[@Nanalyze]

Good point. Note that Japanese companies can be very tough to follow. At my prior job, we needed to hire Japanese-speaking analysts in emerging markets just to read basic financial data. Joe P.

[@warduke8192]

You've identified several valid challenges and uncertainties ahead for WOLF. What is a fair stock price in light of those concerns?

[@Nanalyze]

Everyone needs to decide what that is if they go long a stock. For us, we're just not interested right now given the risks stated in the video.

[@warduke8192]

@@Nanalyze Fair enough, but I think any buy/sell/hold presentation that ignores any quantitative analysis of the current stock price or it’s recent trading range is frustratingly insufficient.

[@Nanalyze]

@@warduke8192 We were already pushing it with a 17-minute video, but good question. ;) What would you consider a fair price to be and what would that be based on? We could probably do an entire video on that, but do you think the current price range it trades at is a fair tradeoff between risk and reward?

[@warduke8192]

@@Nanalyze Thanks for your interaction on this topic. I don’t have the expertise needed in order to objectively derive a fair entry point for WOLF. However, based on the reviews of certain analysts that cover this company, it seems that last week’s prices were attractive for accumulation.

[@Nanalyze]

@@warduke8192 You're most welcome! This one is a really tough call to be honest.

[@terryklender4209]

I don’t believe EV’s are growing like mad.

[@Nanalyze]

We can't believe it either frankly. It all comes down to the lower TCO which is being accelerated by some very cheap cars - cheap on price, not quality. Incoming: kzbin.info/www/bejne/emHNe3pmiMqapZY

[@terryklender4209]

The only EV stock I own is Tesla but I’ll definitely give that a watch. Great videos as always!

[@Nanalyze]

Hey, then you already know! Tesla best selling vehicle in 2023 of any vehicle. That's not a bad start for growth ;) Do check out what BYD is getting up to. Their cheap prices are really spurring adoption in emerging markets (not intuitive, because we always thought EVs were for rich people countries so they can pretend to care about the environment ;) Thank you for the encouraging words!

[@TheSmartLawyer]

​@terryklender4209 you need some Ford $F stock its at a great price for share accumulation, has a great dividend, and they make the #1 selling truck. Their EV Lightning is an awesome truck and will catch on and they will have a great total return. They will be EV leader. Mark this email for 5 years

[@TheSmartLawyer]

​@@Nanalyzelove my Tesla stock!

[@markquino9140]

Why dont you have global foundries in your list genuinely curious if there are concerns, risk or just not appealing or was just not in your radar? They have 9 fabs with shared patent (cross-license) w tsmc. They have ai accelerators for cloud & edge ai inference, defense contracts and ev like infnion which are currently the trends. + partner w ARM. Great Managemnt just hired cfo john hollister formerly from silicon labs currently board of macrofab. Are located around the globe safe from fears of china reunification w taiwan.

[@Nanalyze]

Thank you for the comment! For this exercise, we're specifically looking for companies that produce chips for electric vehicles as majority revenue exposure, not a fraction. The impetus for this search is explained in this video: kzbin.info/www/bejne/lamwfKVmmbl8nZo

[@MrMentalpuppy]

When a Nanalyze video is on my feed 😊❤

[@Nanalyze]

It's love like this that makes all the hard work worth it ;)

[@kyleheller2924]

Playing SiC via ASMI which has a near monopoly on ALD tooling while this temporary EV downswing continues.

[@Nanalyze]

Going back to our exposure comment, an investment in ASML is an investment in an entirely different thesis which we covered here: www.nanalyze.com/2024/01/asml-stock-pick-and-shovel-semiconductor/

[@kyleheller2924]

@@Nanalyze ASMI not ASML (though I own that too).

[@Nanalyze]

Gotcha, thank you for the clarification. ASMI is similar that they sell a broad set of tools to the semiconductor and would have marginal SiC exposure at best. Both pick-and-shovel plays on semis, though we prefer software providers like Synopsys over hardware providers.