On Thursday, Canaccord Genuity adjusted its outlook on Wolfspeed (NYSE: NYSE:WOLF), a leader in the semiconductor industry, by reducing its price target to $47 from the previous $50 while maintaining a Buy rating on the stock. The firm cited several potential avenues for value creation despite recent negative earnings revisions. They anticipate that the worst of these revisions might now be behind the company.
The analyst from Canaccord Genuity believes that additional capital could become available to Wolfspeed, potentially through government initiatives like the CHIPS Act. This influx of support could address some of the financial concerns surrounding the company. Moreover, the presence of an activist investor may push the company's management to consider strategic alternatives, given Wolfspeed's pivotal role in the industry's shift from silicon to silicon carbide (SiC) technology.
Wolfspeed's transition is part of a broader generational change within the power semiconductor industry. While the potential for acquisition exists, any such move would likely be met with regulatory scrutiny. However, as competitors struggle to develop their own SiC material, the strategic importance of acquiring Wolfspeed, especially given its current valuation, could become increasingly apparent.
The price target has been recalibrated to $47 based on approximately 13 times the firm's forecasted adjusted earnings per share (EPS) of $3.62 for the fiscal year 2027, down from the previous estimate of $4.00. This valuation represents a discount compared to the average of around 18 times the calendar year 2026 adjusted EPS for Wolfspeed's peers. Canaccord Genuity suggests that a higher multiple could be justified as the company continues to execute its strategy effectively.
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