Shares of semiconductor company Wolfspeed (WOLF -13.30%) tumbled 30.5% last month, according to data provided by S&P Global Market Intelligence, as investors processed two bits of bad news for the company.
The first was a report by Axios highlighting the company's recent struggles with management and attempts to grow its silicon carbide chips business. The second setback came from a law firm suing the company for alleged securities fraud.
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Losing investor confidence
Wolfspeed transitioned to focusing on silicon carbide semiconductors used in some electric vehicles (EVs) several years ago, and enjoyed significant share price gains during its pivot away from its former lighting business.
However, the company's share price has fallen rapidly, as the transition to EVs has taken longer than most expected and the company's financial results have failed to impress investors. The company's stock is down 80% over the past 12 months.
The latest blow to Wolfspeed's stock came last month as Axios highlighted some of the problems at the company, noting its decision to push out its former CEO in November, cut its workforce by 20%, and halt plans for opening a new factory.
The report noted the company has been plagued by increasing debt as it tried to increase chip production. Meanwhile, its New York plant operates at just 25% utilization.
That leads us to the second reason why Woldfspeed's share price crashed in December. The law firm Block & Leviton said it was suing the company for alleged securities fraud related to materially misleading investors about its revenue outlook at its Mohawk Valley plant.
The law firm said on its website that Wolfspeed "repeatedly claimed that 20% utilization of the Mohawk Valley fabrication facility would result in $100 million revenue out of the facility," but that it now has a "guided to a range 30% to 50% below that mark."
Investors weren't pleased with either bit of news, and understandably pushed down Wolfspeed's share price last month.
Don't rush into Wolfspeed stock
Wolfspeed's revenue fell by about 1.5% in the first quarter (ended Sept. 29) to $194.7 million, and its net loss was $282 million.
With the company currently trying to find its footing in the semiconductor market and management still in flux, it's best to wait on the sidelines of this stock right now. A few more quarters of financial results may go a long way in showing whether Wolfspeed can get back on the right track.
