Shares of Wolf speed (NYSE: WOLF) soared today, up 15.1% as of 2:26 PM ET.
The big move follows a huge 31% move on Friday, continuing the vicious rebound from the company’s recent lows. Still, Wolfspeed shares are down more than 80% year-to-date, showing just how far this once-vaunted chip stock had fallen.
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Still, there was more good news today, with another insider revealing a purchase on the open market after several board members announced share purchases last Friday. Additionally, California Governor Gavin Newsom provided relief for the electric vehicle (EV) industry and its suppliers, including Wolfspeed.
While a number of insider purchases were revealed last Friday, another was revealed on Monday. According to a filing, Wolfspeed CEO Glenda Dorchak bought 3,592 shares on Friday, November 22 at an average price of $8.33 per share. While that was a smaller purchase than other insiders announced last Thursday, the additional purchase, even as shares soared on Friday, was another encouraging sign.
Wolfspeed recently changed CEOs, with Gregg Lowe stepping down and board member Thomas Werner taking on the role of executive chairman to lead the company along with top management while the company searches for a CEO replacement. That doesn’t seem like a very stable situation, so perhaps the insider buying was intended to allay market fears.
In addition to poor execution and poor results amid an electric vehicle recession, Wolfspeed’s stock has also been plagued recently by the election of Donald Trump. After the election, investors have been concerned that the $7,500 electric vehicle tax credit provided as part of the Inflation Reduction Act will be repealed.
But on Monday, California Governor Gavin Newsom announced that California would “step in” if the federal government revoked the EV tax credit. That likely means that California, the largest U.S. state and EV market, could replace the tax credit itself to some extent. The money for the credit would come from California’s Greenhouse Gas Reduction Fund, which Newsom said polluters finance by paying for credits under the state’s cap-and-trade program.
That news boosted all EV-related stocks today, including Wolfspeed, which plans to supply silicon carbide chips to EV manufacturers in the future.
Any stock that drops more than 80% has a lot of rebound potential, including Wolfspeed, should the company get its act together. The company has taken on a lot of debt to spend billions on building new state-of-the-art silicon carbide plants; However, amid the electric vehicle recession and some execution issues, Wolfspeed hasn’t seen any revenue or profit growth as a result of all that spending.
However, now that there is the opportunity to bring in a new CEO and stock prices have fallen to distressed levels, it seems that investors, including company insiders, think a big turnaround is in store.
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Billy Duberstein and/or his clients have no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.
Why Wolfspeed Rallied Again Today was originally published by The Motley Fool
