A ‘hidden gem’ semiconductor stock is skyrocketing

With the semiconductor space ranking among the most rewarding segments of the stock market in recent months, Wolfspeed (NYSE: WOLF) is emerging as a real ‘hidden gem’ in the sector. 

Indeed, WOLF ended the latest trading session valued at $11.38, with minimal losses of 0.87% for the day. However, the equity has generally been bullish in recent weeks, surging by over 38% in the past month.

This bullish outlook is replicated before the October 15 trading session, where WOLF’s share price is up over 32% in pre-market trading.

Why WOLF is rallying

In this context, investors seem to be reacting positively to the company’s announcement about receiving significant mega financing totaling $1.5 billion. Part of the funding saw Wolfspeed receive $750 million from the U.S. Department of Commerce under the CHIPS and Science Act. 

The CHIPS Act offers funding to firms producing semiconductors in the United States. Based on its provisions, Wolfspeed expects to receive $1 billion in cash refunds in the coming years. Several companies, including Intel (NASDAQ: INTC) have received funding from the legal provision. 

The other $750 million is part of new financing from a consortium led by Apollo, The Baupost Group, Fidelity, and Capital Group. To this end, Wolfspeed will leverage the funding to reinforce the firm’s role in silicon carbide manufacturing, which supports electric vehicles (EVs), artificial intelligence (AI) data centers, and renewable energy systems.

In this regard, the funding will likely help Wolfspeed turn things around and fuel growth, as the firm is guaranteed cash generation to accelerate long-term profitability goals. This is a much-needed boost, considering that the stock has been on a downward trajectory for most of the year, plunging over 73% in 2024. 

The stock’s losses accelerated after the Q2 2024 results, where the revenue plunged 1% year over year to $200 million, while net income also dropped 54% to $174.9 million.

Besides the bullish sentiments emanating from the funding, Wolfspeed seeks to attract more interest. The company intends to increase its manufacturing capacity through its facility in North Carolina, which is currently under construction.

Analysts outlook on WOLF stock 

Based on these fundamentals, market strategist Gareth Soloway has termed the equity’s recent growth a hidden gem, stating that WOLF is “too attractive.”

On the other hand, in an investor note on October 11, analysts from Roth/MKM maintained a ‘Buy’ rating for WOLF, setting a price target of $25. This outlook is based on the analysts noting the company’s ongoing negotiations to provide 200mm silicon carbide (SiC) wafers to third-party customers.

From a technical analysis perspective, observations by analyst Market Trader by MyntBit noted that as the stock enjoys bullish momentum, the crucial level to watch is the $14.43 resistance, which, if breached, could signal further upside potential.

A breakout above this level could pave the way for a surge toward $17, with the potential for an eventual rise to $20 in the medium term. If the stock fails to hold above $14.43 or if momentum stalls, it may see pullbacks, with key support levels at $10.50 and $9.50.

In summary, as things stand, WOLF seems to be on the right path to capture the attention of the semiconductor industry, which continues to be dominated by Nvidia (NASDAQ: NVDA), which has soared to new highs amid its role in the growing AI sector.