Super Micro Computer (SMCI), the San Jose-based software company, and its investors have been on a rollercoaster ride in 2024. After a 59% drop in market value over the past six months, SMCI was removed from the Nasdaq-100 index, making way for Palantir Technologies (PLTR). The ousting will take effect on December 23. This restructuring is part of the annual update of the Nasdaq-100 Index, aimed at ensuring that the index accurately represents the largest non-financial companies listed on the Nasdaq Stock Exchange.
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The thing is, SMCI faces a daunting task: rebuilding the trust of its investors and Wall Street alike. It’s not an easy task whatsoever, as once you break trust, it’s extremely hard to regain it. Despite being one of the leading forces in the software industry, Super Micro Computer has been one of the “trouble-makers kids” on Nasdaq, going back to 2018, when it was temporarily delisted after the company failed to abide by the Nasdaq listing rule.
Let’s examine, then, in short, SMCI’s standings after being delisted from Nasdaq-100 yesterday and if there is a potential for a comeback on the cards:
- Financial Reporting Problems: SMCI’s exclusion from the index derives from significant financial challenges, including delays in filing its annual report and allegations of accounting fraud by Hindenburg Research in August 2024. These issues led to the resignation of its auditor and a sharp decline in the stock’s price. To address these problems, SMCI has appointed a new auditor and received an extension from Nasdaq to submit its 10-K and 10-Q reports by February 25, 2025. This move has helped stabilize the stock and regain some investors’ trust.
- Business Operations and Stock Performance: Despite these financial controversies, SMCI’s business operations remain strong. The company has announced new collaborations with Nvidia (NVDA) and continues to work with other key players in the industry like AMD (AMD) and Intel (INTC). These partnerships have strengthened investors’ confidence and driven a surprising stock comeback, climbing just over 100% in the last month. However, this latest news from Nasdaq probably won’t help the stock’s cause. Nevertheless, analysts firm KC Rajkumar believe the delisting fears are overblown and have raised their price targets from $45 to $60, suggesting a potential 36% increase in the stock’s value over the coming months.
- Future Prospects and Challenges: In spite of yesterday’s demoralizing news, SMCI faces a mix of opportunities and challenges. The demand for AI and data center solutions is growing, and SMCI, with its strong partnerships and key products, is still in a good place to benefit from this trend. However, the company must continue to address trust issues and ensure compliance with regulatory requirements.
Is SMCI Stock a Good Buy?
Looking at Wall Street, SMCI stock is a Hold. This is based on two Buy ratings, five Holds, and two Sell ratings. The average price target is $38.57, reflecting a 5.82% upside.
What’s next for SMCI?
Given the recent financial challenges and delisting from the Nasdaq-100, Super Micro Computer faces a challenging task in rebuilding investor trust. However, with strong business operations, key industry partnerships, and a potential for stock recovery, the company might find equilibrium in the near future.
