12:42 PM EST, 11/07/2024 (MT Newswires) -- Wolfspeed's ( WOLF ) Mohawk Valley revenue fell short of expectations, and guidance of $60 million in the December quarter and downward revision for March quarter revenue from $100 million to $85 million reflect broader demand challenges, Morgan Stanley said in a note on Thursday.

The firm said that the company will be paying restructuring charges of about $400 million to $450 million over the next several quarters to manage cash flow concerns resulting in an annual cost saving of $200 million in fiscal 2026.

Divestment of non-core assets will likely generate $150 million in cash and improve Wolfspeed's ( WOLF ) liquidity and it plans to reduce capital expenditures by aligning production with demand, according to the note.

Morgan Stanley said that the CHIPS Act and financing from Apollo give the company runway through 2026. However, execution is now crucial, especially in meeting production milestones, utilization targets at Mohawk Valley, and ramping up at the Siler City facility by summer 2025.

Near-term hurdles for the company include issuing $300 million in equity, refinancing a portion of 2026 convertible notes, increasing competition from Chinese Silicon Carbide wafer producers and automotive industry headwinds, the firm added.

Morgan Stanley lowered the price target on Wolfspeed ( WOLF ) to $11 from $15 and reiterated equal-weight rating.

Wolfspeed ( WOLF ) shares were recently down 32% after reporting weaker fiscal Q1 financial results late Wednesday.

Price: 9.39, Change: -4.32, Percent Change: -31.51