Why Wolfspeed Stock Blasted Higher (Again) Today

Shares of Wolfspeed (NYSE: WOLF) continued their remarkable recovery on Wednesday, soaring by as much as 19.5%. As of 12:35 p.m. ET, the stock was still up 17.8%.

The catalyst that sent the semiconductor specialist higher was a vote of confidence from a Wall Street analyst.

A rapid ascent

Morgan Stanley's Joseph Moore raised his price target on Wolfspeed to $15 from $10, though he maintained an equal weight (hold) rating on the shares. That new target would amount to a gain of roughly 9% from Tuesday's closing price. However, with its move higher Wednesday, the stock has already blown past that price target.

It has been a busy few days for the silicon carbide semiconductor specialist. Late last week, Wolfspeed received some bullish commentary from another Wall Street analyst, who suggested the company was landing new customers.

The momentum continued Tuesday when Wolfspeed announced it had qualified for proposed funding of $750 million under the U.S. CHIPS Act and landed an additional $750 million in private financing to support its expansion plans in North Carolina and New York.

Moore's price target increase gave shareholders another reason to celebrate.

A bit of context

Wednesday's move continued Wolfspeed's relentless rise of late, as the stock has gained 63% over the past week and 86% over the past month. Taking a step back to put that move into context, however, shows that the shares are still down 63% year to date.

Wolfspeed has been working to get its new silicon carbide semiconductor production facilities up and running, so this week's financing news was certainly welcome. That said, investors should still exercise caution with the stock. The company's silicon carbide chips could see accelerating demand after it reaches full production of its more cost-effective 200mm wafers. But for now, Wolfspeed continues to struggle.

In its fiscal 2024 fourth quarter (which ended June 30), Wolfspeed's revenue was essentially flat year over year, and its losses widened.

Finally, Wolfspeed is currently trading at nearly 3 times sales, which is a high valuation for a company with flat sales and no profits. Investors would do better to watch and wait despite the market's recent enthusiasm for this stock.

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Danny Vena has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.