Super Micro Computers (NASDAQ:SMCI) has attracted quite a bit of press of late, though not the type of attention the company desires.
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SMCI’s previous auditor, Ernest and Young, publicly disassociated itself from the company, stating that they were unable to rely on their financial statements. SMCI had earlier faced allegations of accounting improprieties, missed an SEC filing deadline, and is in danger of being delisted from the NASDAQ.
However, there’s a silver lining for investors: SMCI has appointed BDO USA as its new auditor and submitted a compliance plan to NASDAQ, signaling its commitment to retaining its exchange listing. These moves have sparked investor optimism, driving SMCI shares up by an impressive 81% from their mid-November lows.
So, is now the time for investors to give SMCI a second look?
Top investor Brett Ashcroft Green, who sits in the top 4% of TipRanks’ stock pros, is not quite ready to take the plunge.
“Despite a promising 32% growth forecast for 2025-2026, competition and potential restatements of revenue and earnings pose significant risks,” asserts the 5-star investor.
Green points out that the addition of a new auditor presents a big unknown, as these robust growth projections might need to be revised. Much of the SMCI growth case rests on these forward numbers, so any downward revision would be a big setback, the investor adds.
In addition, Green expresses concerns that SMCI is competing more on price than quality, putting doubts on SMCI’s long-term prospects amidst growing competition from Dell, Foxconn, and Hewlett Packard.
Of course, the ever-looming threat of delisting is also quite the risk for investors to weigh.
And yet, as Green points out, the stock offers potential upside, currently trading at just 3.5x book value.
“The potential to buy a $90+ stock selling at $38, is an enormous potential ROI should everything go swimmingly,” Green sums up. This is entirely dependent on SMCI remaining on NASDAQ and for the previous financial statements to indeed be accurate.
Still, Green concludes that the risks outweigh the rewards for now. He rates SMCI shares a Hold (i.e. Neutral), advising caution until the company resolves its lingering uncertainties. (To watch Green’s track record, click here)
Wall Street analysts tend to agree. With 2 Buy, 6 Hold, and 2 Sell recommendations, SMCI holds a Hold (i.e. Neutral) consensus rating. However, its 12-month average price target of $39.43 translates into potential gains of ~21%. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
