Super Micro Computers (NASDAQ:SMCI) has faced a barrage of negative press in recent months. The U.S. Department of Justice launched a probe into potential accounting improprieties, the company’s auditor abruptly resigned, and delays in the filing of its 10-K report all combined to send both confidence and shares plummeting.
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The reversal of fortune has been particularly sharp for the company, whose stock had soared an astonishing 2,800% in the two years leading up to March 2024. This makes the more than 80% decline over the past eight months all the more striking.
Amidst all the background noise, SMCI released its preliminary FQ1 2025 results, with revenues expected to increase nearly 180% year-over-year to $5.9 to $6 billion. For the second fiscal quarter, the company anticipates net sales between $5.5 billion and $6.1 billion, implying a robust 58% increase compared to the previous year.
In light of these developments, one top investor, known by the pseudonym KM Capital, is seizing the opportunity. Echoing Warren Buffett’s famed advice to “be greedy when others are fearful,” KM Capital believes the current downturn could present a chance for long-term gains.
“Super Micro Computer is significantly undervalued due to highly likely exaggerated fears of accounting manipulations and the reported DOJ investigation, presenting a strong buying opportunity,” posits the 5-star investor, who ranks in the top 3% of TipRanks’ stock pros.
KM Capital also highlights SMCI’s robust strategic partnerships with industry leaders such as Nvidia, AMD, and Intel. The partnership with Nvidia was recently bolstered by a new collaboration announced last month.
“This factor highlights Nvidia’s confidence in SMCI’s trustworthiness,” claims the investor, adding that “it is highly unlikely that Jensen Huang or Lisa Su would risk their reputations by supporting collaboration with a company with questionable integrity or operational practices.”
And therein lies KM Capital’s biggest reason to rate SMCI shares a Strong Buy; the investor simply does not believe that SMCI – which is under “intense public scrutiny” – would play fast and loose with its books. (To watch KM Capital’s track record, click here)
The views on Wall Street, though a bit more tempered, still envision healthy gains on the horizon. With 3 Buy, 6 Hold, and 2 Sell ratings, SMCI claims a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $47.04 would imply gains of ~153%. (See SMCI stock rating)
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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.
