CY
Cypress Semiconductor Corp.
stock NASDAQ

Hey everyone,
(tl;dr at bottom)
After spending the last 5 years with Palantir, Wolfspeed came across my radar. My first thought when I heard about the next meme squeeze was to roll my eyes, since I assumed it was just another garbage company with a short-term squeeze gamble. But through the DD on this sub and my own research, I've come to be shocked at how undervalued this company is--all because their restructuring has inundated the company with one-time and/or short-term expenses that make their margins and net income look awful on paper. I finally had the time to go through and do a detailed look at the numbers with the goal of isolating these one-time / short-term expenses, and here are the results:
[Last Six Quarters + Estimate for FY 2026 Q1 \(Fall\)](https://preview.redd.it/1dx77o1bclze1.png?width=669&format=png&auto=webp&s=4c2bd1d454488f9d4e43f16e03b9e7133175926b)
**Past Business Operations**
* Wolfspeed closed their Radio Frequency product line in FY 2024 Q1. Then, in FY 2024 Q4, they started facing industry headwinds due to a downturn in the semiconductor cycle (a less intense demand for EVs than anticipated, though adoption of SiC in EVs remains high). During this downturn and with their new fabs highly underutilized, they burned between $125m - $175m/qtr, depending on how one accounts for underutilization and factory start-up costs. Then in FY 2025 Q1 things got worse from a surface-level view, because they began a $400m - $450m restructuring plan to commit 100% to 200m SiC materials and devices. This resulted in the closure of their Farmers Branch facility in Texas (now finished) and the ongoing closure of their facility in Durham (expected to be done by end of CY 2025). They claimed to ultimately expect $200m annualized savings from their restructuring, so it is likely that this improves their OpEx by $50m/qtr.
**Projected Future Business Operations**
* If base industry demand starts to return (a safe bet: standard cycle recovery + emerging market for SiC), then it should at the bare minimum restore the normalized gross profit closer to pre FY 2024 Q4 levels (say \~$15m). If underutilization costs continue to decline at the same rate, they should be down to \~$20m/qtr, resuliting in \~$45m gross profit. Then if they realize $40m of the $50m estimated quarterly savings from the restructuring, OpEx should drop to \~$90m. At this point, they have an operating loss of only $65m/qtr. Adding in non-operating expenses from the interest on their debt of about $50m/qtr, this puts their net loss $125m/qtr, or $500m/yr. From there, one has to (a) check their runway, and (b) project that demand and thus utilization and thus margins surpass breakeven. (They have officially said that they expect their revenue breakeven to be below $1b in annual revenue, so $250m/qtr.)
**Liquidity / Financials**
* They have $1.4b in cash, so probably \~$900m at the start of the next FY after restructuring is complete (an additional \~$150m over the next two quarters, making the burn rate \~$250m/qtr if all else is equal to FY 2024 Q4). After that point, they will likely burn no more than $125m/qtr, or $500m/year for one year (likely closer to \~$400m as demand recovers and fab utilization increases), then maybe $250, then breakeven in the following few years due to increased demand/fab utilization, meaning they will burn \~$1.5b between now and breakeven. In the short term, they have two knocks against them : (1) they must keep $500m cash on hand as part of their 2030 debt covenant as collateral, meaning they only have \~$400m runway at the start of FY 2026; and (2) they will have to repay the $600m 2026 debt note. However, they already have $600m in tax credits that can be refunded in cash payment beyond the tax burden. Assuming they use these to offset their burn rate, that functionally puts their current cash to $2b, meaning they can already burn their $1.5b and still honor the $500m cash maintenance before breakeven. They also already have an offer to restructure their $600m 2026 note, so that pushes their next debt obligation to 2029. On top of this, (1) the CHIPS Act should provide them with $750m in direct funding (i.e., cash) within the next year, and (2) the BASIC Act if passed could give them an additional \~$400m in tax credits (i.e., cash). This provides them with up to an additional $1.15b to use to negotiate better debt terms and/or pay down debt. They would likely restructure and maintain cash on hand, so by 2029 their $50m interest expense should be reduced as well.
**Conclusion**
* The company will be able to cover its next year with the tax credits it already has. This would at the very least allow it to restructure its 2026 debt and give it time to breakeven, although a lack of additional funding could leave it hampered by debt. However, CHIPS funding, which the company continues to expect and which seems likely based on Trump's enormous push for domestic semiconductor manufacturing, would give the company plenty of breathing room to capitalize aggressively during the next industry cycle. Additional BASIC funding on top of that would be gas on the fire, and it too seems likely, being proposed by a bipartisan group of 20 representatives. All in all, while the transition cash burn is scary, WOLF is not nearly as high risk as it seems, and it should be well positioned to capitalize in a protected American market. Trump semiconductor tarriffs, which should soon be revealed, will affect all of their meaningful competition, although it may hurt them some too.
**tl;dr**
* This company is going to survive this transition, and in 2-3 years it will start to print money, restoring the thesis that drove its undiluted stock to $142.33. With dilution factored in, attaining that same market cap ($14.5b) would put the stock at $93.21. While it's important to keep a watchful eye for any serious missteps in the next two years as they ramp production, **this company is a compelling 20x**. (Btw, this doesn't include ***anything*** about a short squeeze!) I'm in for 50k shares and may add more below $4.

Hey everyone,
(tl;dr at bottom)
After spending the last 5 years with Palantir, Wolfspeed came across my radar. My first thought when I heard about the next meme squeeze was to roll my eyes, since I assumed it was just another garbage company with a short-term squeeze gamble. But through the DD on this sub and my own research, I've come to be shocked at how undervalued this company is--all because their restructuring has inundated the company with one-time and/or short-term expenses that make their margins and net income look awful on paper. I finally had the time to go through and do a detailed look at the numbers with the goal of isolating these one-time / short-term expenses, and here are the results:
[Last Six Quarters + Estimate for FY 2026 Q1 \(Fall\)](https://preview.redd.it/1dx77o1bclze1.png?width=669&format=png&auto=webp&s=4c2bd1d454488f9d4e43f16e03b9e7133175926b)
**Past Business Operations**
* Wolfspeed closed their Radio Frequency product line in FY 2024 Q1. Then, in FY 2024 Q4, they started facing industry headwinds due to a downturn in the semiconductor cycle (a less intense demand for EVs than anticipated, though adoption of SiC in EVs remains high). During this downturn and with their new fabs highly underutilized, they burned between $125m - $175m/qtr, depending on how one accounts for underutilization and factory start-up costs. Then in FY 2025 Q1 things got worse from a surface-level view, because they began a $400m - $450m restructuring plan to commit 100% to 200m SiC materials and devices. This resulted in the closure of their Farmers Branch facility in Texas (now finished) and the ongoing closure of their facility in Durham (expected to be done by end of CY 2025). They claimed to ultimately expect $200m annualized savings from their restructuring, so it is likely that this improves their OpEx by $50m/qtr.
**Projected Future Business Operations**
* If base industry demand starts to return (a safe bet: standard cycle recovery + emerging market for SiC), then it should at the bare minimum restore the normalized gross profit closer to pre FY 2024 Q4 levels (say \~$15m). If underutilization costs continue to decline at the same rate, they should be down to \~$20m/qtr, resuliting in \~$45m gross profit. Then if they realize $40m of the $50m estimated quarterly savings from the restructuring, OpEx should drop to \~$90m. At this point, they have an operating loss of only $65m/qtr. Adding in non-operating expenses from the interest on their debt of about $50m/qtr, this puts their net loss $125m/qtr, or $500m/yr. From there, one has to (a) check their runway, and (b) project that demand and thus utilization and thus margins surpass breakeven. (They have officially said that they expect their revenue breakeven to be below $1b in annual revenue, so $250m/qtr.)
**Liquidity / Financials**
* They have $1.4b in cash, so probably \~$900m at the start of the next FY after restructuring is complete (an additional \~$150m over the next two quarters, making the burn rate \~$250m/qtr if all else is equal to FY 2024 Q4). After that point, they will likely burn no more than $125m/qtr, or $500m/year for one year (likely closer to \~$400m as demand recovers and fab utilization increases), then maybe $250, then breakeven in the following few years due to increased demand/fab utilization, meaning they will burn \~$1.5b between now and breakeven. In the short term, they have two knocks against them : (1) they must keep $500m cash on hand as part of their 2030 debt covenant as collateral, meaning they only have \~$400m runway at the start of FY 2026; and (2) they will have to repay the $600m 2026 debt note. However, they already have $600m in tax credits that can be refunded in cash payment beyond the tax burden. Assuming they use these to offset their burn rate, that functionally puts their current cash to $2b, meaning they can already burn their $1.5b and still honor the $500m cash maintenance before breakeven. They also already have an offer to restructure their $600m 2026 note, so that pushes their next debt obligation to 2029. On top of this, (1) the CHIPS Act should provide them with $750m in direct funding (i.e., cash) within the next year, and (2) the BASIC Act if passed could give them an additional \~$400m in tax credits (i.e., cash). This provides them with up to an additional $1.15b to use to negotiate better debt terms and/or pay down debt. They would likely restructure and maintain cash on hand, so by 2029 their $50m interest expense should be reduced as well.
**Conclusion**
* The company will be able to cover its next year with the tax credits it already has. This would at the very least allow it to restructure its 2026 debt and give it time to breakeven, although a lack of additional funding could leave it hampered by debt. However, CHIPS funding, which the company continues to expect and which seems likely based on Trump's enormous push for domestic semiconductor manufacturing, would give the company plenty of breathing room to capitalize aggressively during the next industry cycle. Additional BASIC funding on top of that would be gas on the fire, and it too seems likely, being proposed by a bipartisan group of 20 representatives. All in all, while the transition cash burn is scary, WOLF is not nearly as high risk as it seems, and it should be well positioned to capitalize in a protected American market. Trump semiconductor tarriffs, which should soon be revealed, will affect all of their meaningful competition, although it may hurt them some too.
**tl;dr**
* This company is going to survive this transition, and in 2-3 years it will start to print money, restoring the thesis that drove its undiluted stock to $142.33. With dilution factored in, attaining that same market cap ($14.5b) would put the stock at $93.21. While it's important to keep a watchful eye for any serious missteps in the next two years as they ramp production, **this company is a compelling 20x**. (Btw, this doesn't include ***anything*** about a short squeeze!) I'm in for 50k shares and may add more below $4.