Why Wolfspeed Stock Soared 10.1% Today
Key Points
In an interview released on Friday, Wolfspeed's CEO said his company will work to diversify its customer base, looking beyond electric vehicles.
Wolfspeed is still in a precarious position, and its stock could continue to see dilution.
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Shares of Wolfspeed (NYSE: WOLF) jumped on Tuesday, finishing the day up 10.1%. The spike came as the S&P 500 and Nasdaq Composite gained 0.9% and 0.6%, respectively.
The stock is continuing to gain after its CEO outlined his vision for the company's future in an interview released Friday.
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Wolfspeed wants to diversify
The company's CEO, Robert Feurle, laid out his plan to turn the embattled chipmaker around. In an interview with Triangle Business Journal, Feurle said the key was diversification. Where his predecessor focused almost exclusively on the electric vehicle (EV) market, Feurle made clear he thinks there are several markets for its energy-efficient chips.
While Feurle still believes EVs are a critical market for the company, he stressed that over-concentration is a trap, saying, "if you're a one-trick pony like in the past, that's just very, very dangerous," and that its technology could be useful in aerospace, utilities, and even artificial intelligence (AI) data centers.
Image source: Getty Images.
Wolfspeed is risky
After its exit from Chapter 11 Bankruptcy, Wolfspeed has shed massive amounts of debt and has the chance to refocus and implement a new strategy from the ground up. Its technology is interesting, and its domestic manufacturing is an asset; however, it is now owned primarily by its creditors, and its stock is under constant threat of dilution.
I do think there are upsides here if the company can find its footing, but there is substantial risk. If you have a particularly high tolerance for risk, Wolfspeed could be an interesting small addition to your portfolio, but I would caution most investors to stay away.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Wolfspeed. The Motley Fool has a disclosure policy.
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