Wolfspeed Inc (NYSE: WOLF) has received court approval for its Chapter 11 reorganization plan and is set to exit bankruptcy protection in the coming weeks.
The announcement sent the company’s share price up 43% on Tuesday. Investors appear encouraged by WOLF’s plans to cut its debt load by as much as 70% to restore financial stability.
Robert Feurle – the firm’s chief executive, struck an optimistic tone in the press release, saying the restructuring will allow Wolfspeed to “move swiftly on our strategic priorities.”
However, while the headline may sound promising, Wolfspeed stock remains unattractive to own as its underlying fundamentals are still deeply concerning.
Why debt reduction doesn’t fix Wolfspeed stock
WOLF stock remains a no-go since emerging from bankruptcy isn’t the same as emerging with a viable business model.
The silicon carbide specialist had a disaster of a balance sheet before the restructuring – and even after shedding billions in liabilities, the business remains financially fragile.
Its current ratio, a measure of short-term liquidity, sits at a dismal 0.36, signaling continued pressure to meet near-term obligations.
And operationally, the picture is even bleaker. The firm posted a negative EBITDA of over $216 million in the last twelve months, and its gross margin was underwater at -3.23%.
That’s not just bad – it’s structurally unsustainable. In short, debt reduction may buy time, but it doesn’t fix a business losing cash.
WOLF shares lack attractive valuation
Wolfspeed currently commands a market cap of roughly $300 million, which may seem relatively small on the surface – but is frothy for a company with negative profitability and no clear path to cash flow generation.
The NYSE-listed firm has generated $757 million in revenue over the past year, but with margins in the red and innovation costs mounting, it’s hard to justify owning WOLF shares – particularly after a sharp surge on Tuesday.
All in all, the price action this morning reflects hope – not results.
Investors are pricing in a turnaround that’s yet to materialize, and with competition intensifying in the worldwide silicon carbide market, Wolfspeed’s ability to execute remains highly uncertain.
Simply put, the valuation is stretched, and the risk-reward skew is unattractive.
How to play Wolfspeed shares in 2025
Wolfspeed’s restructuring may offer a lifeline, but it doesn’t erase the operational red flags.
The company is still navigating a fiercely competitive landscape with weak margins, poor liquidity, and a history of underperformance.
While management talks up strategic priorities and innovation, the numbers tell a different story – one of fragility and financial strain.
For investors seeking exposure to the semiconductor or power device space, there are stronger, more stable alternatives than Wolfspeed stock.
That’s why Wall Street currently has a consensus “underweight” rating on WOLF shares.
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