The path to recovery for silicon carbide specialist Wolfspeed is proving difficult. Despite emerging from bankruptcy proceedings just three months ago, the company is already confronting renewed investor doubt. While a recent supply agreement with a major automaker offers a glimmer of hope, concerning signals from the options market and persistent production issues are applying significant downward pressure.
Operational Headwinds Undercut Financial Boost
A substantial cash infusion has failed to mask fundamental operational struggles. In early December, Wolfspeed received a tax refund of $698.6 million, bolstering its cash reserves to approximately $1.5 billion. However, the core issue lies in production execution. Reports indicate the company’s crucial Mohawk Valley fabrication facility is operating at only about 25% of its capacity, raising serious questions about the timeline to sustainable profitability.
This operational weakness was starkly reflected in the company’s disappointing guidance. Management’s revenue forecast for the second quarter of fiscal 2026, projected between $150 million and $190 million, fell significantly short of the analyst consensus estimate of $232 million. Company leadership attributed the shortfall to market softness and inventory adjustments among its customers. Consequently, the majority of market analysts maintain a skeptical stance, predominantly recommending investors reduce their holdings.
Derivatives Market Flashes a Stark Warning
Parallel to these operational concerns, the derivatives market is painting a bearish picture. Trading activity on a recent Friday revealed a sharp surge in bearish bets. The volume of put options traded jumped by 80% to nearly 284,000 contracts—a figure well above the daily average of around 157,000. This aggressive positioning toward a price decline aligns with the stock’s recent performance: during December alone, Wolfspeed shares shed roughly 20% of their value, erasing a large portion of the gains achieved post-restructuring.
Should investors sell immediately? Or is it worth buying Wolfspeed?
Key Data Points:
* Bearish Sentiment: Put option volume spiked 80% above its daily average.
* Share Price Decline: Equity lost approximately 20% in December.
* Analyst Consensus: The average price target sits at $10.50, below the current trading level.
* Capacity Utilization: Mohawk Valley fab is running at an estimated 25% capacity.
* Guidance Miss: Q2 revenue forecast ($150-$190M) is substantially below consensus ($232M).
Strategic Partnership Provides a Counterweight
Amid the challenges, a significant strategic development offers a positive counter-narrative. On December 9, Wolfspeed announced a supply agreement with Toyota to provide silicon carbide components for the automaker’s electric vehicles. This partnership serves as a key validation of Wolfspeed’s technology and demonstrates ongoing demand from large-scale automotive manufacturers. Furthermore, shareholders expressed support for the management team at the recent annual general meeting.
All eyes are now on the upcoming quarterly earnings report scheduled for February 4, 2026. Investors will be scrutinizing the release for concrete evidence of improved utilization rates at the Mohawk Valley facility. In the interim, technical support at the $17 price level is viewed as a critical marker for the stock’s near-term directional trend.
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