Is The 60% Rise In Wolfspeed Stock Justified?

September 9th, 2025 by Trefis Team
WOLF: Wolfspeed logo
WOLF
Wolfspeed

Wolfspeed (NYSE: WOLF) shares exploded 60% in extended trading yesterday, September 9, after receiving court approval of its Chapter 11 reorganization plan. The silicon carbide leader, currently at $1.24 and down over 80% year-to-date, secured creditor backing from over 97% of senior secured note holders and 67% of convertible note holders.

The key question: Is this move justified?

The answer is yes, but with major caveats. The court approval represents a fundamental financial transformation that could justify the rally and potentially much more. The reorganization delivers:

  • 70% debt reduction ($4.6 billion elimination)
  • 60% cut in annual interest payments
  • Expected emergence from bankruptcy within weeks

This dramatic deleveraging transforms Wolfspeed’s cash flow profile at a time when the silicon carbide industry is experiencing rapid growth from electric vehicle adoption and renewable energy infrastructure. The company’s leadership position provides significant leverage once financial constraints are removed.

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That being said, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Separately, see – Rocket Companies: RKT Stock to $40?

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The Recovery Thesis

10-20x Upside Scenario:

  • Debt elimination creates a substantial cash flow improvement
  • High-growth silicon carbide market exposure with strong positioning
  • Operational improvements could drive margin expansion
  • Severely distressed valuation provides substantial upside leverage

Key Risks:

  • Weak yields in 8-inch silicon carbide device production persist
  • Existing equity holders receive only 3-5% of new common equity (massive dilution)
  • Intense Chinese competition in silicon carbide manufacturing
  • Execution risks remain despite financial restructuring

Outlook

Wolfspeed stands at a critical inflection point. The court-approved reorganization eliminates immediate financial distress, potentially unlocking substantial value in a high-growth market. While a 10-20x upside is theoretically possible given the debt reduction and market opportunity (something we discussed in our previous analysis focusing on upside potential for Wolfspeed – WOLF Stock To $20?), investors must weigh operational execution risks, competitive pressures, and severe equity dilution. The successful court approval provides momentum that could sustain through the emergence, with the next several weeks critical as the company completes its restructuring.

See, there always remains a meaningful risk when investing in a single stock or just a handful of stocks. Consider the 30-stock Trefis High-Quality (HQ) Portfolio, which has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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