Overall, Wall Street investors seemed to be in a good mood on Thursday morning. Stock market indexes opened generally higher, as market participants tried to recover their confidence after recent reports suggested that the Federal Reserve might prove to be more stubborn than expected in its efforts to fight inflation. Shortly after the opening bell, major benchmarks were up as much as half a percent.
Yet not every stock was able to participate in the mini-rally Thursday morning. Hawaiian Electric Industries (HE -5.91%) has been under pressure over its potential liability in the devastating wildfires that have hit the island of Maui, while Wolfspeed (WOLF 5.55%) disappointed investors with its latest financial performance. Here's what you need to know about why these stocks are falling and whether you should be worried about their future.
Hawaiian Electric could face big losses
Shares of Hawaiian Electric Industries fell more than 30% early Thursday. The electric utility company is facing scrutiny as lawsuits emerge alleging that its equipment played a role in starting the fires that have destroyed most of the town of Lahaina, and shareholders seem increasingly nervous about whether the company will be able to emerge from the crisis without major changes.
Lawsuits against Hawaiian Electric allege that the poles carrying power lines across the island blew over in a recent storm, causing the lines to come into contact with dry grass that then ignited. The plaintiffs argue that there were no lightning strikes in the area where at least some of the fires started, seeking to rebut a defense that the utility would be likely to use.
The latest drop in the stock came amid reports that Hawaiian Electric has sought out advice from advisors with expertise in corporate restructuring. With so much potential liability from thousands of homeowners affected by the fires, the utility might have to take further action to protect itself and its operations going forward.
With today's drop, the utility stock has lost about 75% of its value since the beginning of August. It could be a long time before shareholders get any certainty about what the future will hold for Hawaiian Electric.
Wolfspeed sees a big slowdown
Elsewhere, shares of Wolfspeed were down about 14% early Thursday morning. The semiconductor company reported fiscal fourth-quarter financial results for the period ended June 25 that showed growth slowing to a crawl recently.
Wolfspeed's numbers told a tough story. Revenue of $236 million was up just 3% year over year. Adjusted losses ballooned to $52.8 million, or $0.42 per share, which was double the amount that Wolfspeed lost in the year-earlier period.
Wolfspeed executives tried to keep confidence higher. CEO Gregg Lowe pointed to $5 billion in recent funding that will help it keep looking to expand its production capacity. With demand for silicon carbide devices rising because of their usefulness in areas like electric vehicles, fast-charging stations, 5G networks, renewable energy and storage, and aerospace and defense, Wolfspeed is optimistic that it can generate long-term growth.
Nevertheless, shareholders didn't seem to like Wolfspeed's guidance, which called for fiscal first-quarter revenue of between $220 million and $240 million and adjusted losses of $0.60 to $0.75 per share. The big drop in the stock price shows just how unwilling investors are to wait for profits from the companies in which they invest.