Chipmaker Wolfspeed got a bullish endorsement from a Wall Street research firm on Tuesday. Wolfspeed stock is a play on the growth of electric vehicles, the firm said.
"As a leading supplier of both silicon carbide (SiC) materials and devices, we believe Wolfspeed is one of the greatest ways to invest in the electric vehicle transition underway today," Evercore ISI analysts said in a note to clients.
They added, "With SiC enabling higher power requirements and improved energy efficiency, demand for SiC is accelerating significantly faster than anyone expected just 6-12 months ago (across both auto and industrial markets)."
Evercore ISI initiated coverage of Wolfspeed stock with an outperform rating and price target of 155.
Wolfspeed Stock Pulls Back In Rough Session
On the stock market today, Wolfspeed stock dropped 2.5% to 113.98 amid a rough day for stocks overall. The major indexes tumbled Tuesday after a hot inflation reading from the Labor Department's consumer price index.
On Friday, Durham, N.C.-based Wolfspeed announced plans to build a state-of-the-art, multibillion-dollar silicon carbide materials facility in Chatham County, N.C. The facility will make primarily 200-millimeter silicon carbide wafers. The wafers will supply Wolfspeed's Mohawk Valley Fab, which opened earlier this year.
Investor concerns about Wolfspeed stock revolve around valuation, capital expenditures and current negative free cash flow. But Evercore sees those concerns as misguided, given the company's leadership position and market opportunities in power management chips.
Wolfspeed Ranks Eighth In Group
Silicon carbide chips can handle higher voltages and are more power efficient than traditional silicon chips. Silicon carbide chips will enable faster charging and improved range for electric vehicles, proponents say.
The Evercore team sees a clear path for Wolfspeed earnings per share to grow from less than $1 in 2023 to about $12 by 2030.
Wolfspeed stock ranks eighth out of 31 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 87 out of 99.
Buy Ratings For Wolfspeed, Onsemi
On Tuesday, Cowen analyst Matthew Ramsay reiterated his outperform rating on Wolfspeed stock with a price target of 125.
"We remain constructive on a nascent SiC industry and Wolfspeed's position as both the largest merchant SiC wafer provider and its quickly ramping device business," Ramsay said in a note to clients.
Plus, he maintained his outperform rating on industry peer ON Semiconductor, also known as Onsemi. Onsemi also makes silicon carbide power semiconductors for the auto industry.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
