Super Micro Computer (SMCI), a manufacturer of computer products, saw its stock drop on Tuesday after prominent short-seller Hindenburg Research accused the company of “accounting manipulation” and other shady practices. Indeed, during a three-month investigation, the Hindenburg report claimed that it found undisclosed related party transactions and export control failures. Interestingly, Super Micro apparently has a long history of violating U.S. export bans and has seen its number of exports to Russia increase by three times since the invasion of Ukraine.
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The report also highlighted that Super Micro settled with the SEC in 2020 for $17.5 million over “widespread accounting violations,” yet claimed that the company’s practices didn’t improve. Furthermore, it noted that several executives involved in the previous scandal were rehired.
According to Hindenburg, these issues, along with pressures to meet quotas by any means necessary, suggest that Super Micro continues to engage in problematic business practices. And, to make matters worse, the firm is now facing stronger competition that can offer better products and services.
There is no doubt that this is a high-profile short report, given how popular SMCI has been so far in 2024. In fact, the stock soared from $290 in January to over $1200 by March before falling about 50% from its peak, which was mainly due to its connection to AI and partnerships with Nvidia (NVDA).
Is SMCI Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SMCI stock based on five Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 113% rally in its share price over the past year, the average SMCI price target of $978.50 per share implies 76.61% upside potential.
