Through the first part of 2024, Super Micro Computers (NASDAQ:SMCI) seemed to have caught lightning in a bottle. The maker of AI servers shot up by over 300% between the beginning of the year and the middle of March, as the world raced to build out the rapidly developing technology.
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Momentum faded as the months ticked by, however, and the latter part of the year was filled with a number of bumps in the road. The company absorbed a double blow in late August, when Hindenburg Research accused SMCI of financial improprieties. This was followed shortly thereafter by SMCI missing a 10-K filing with the U.S. Securities and Exchange Commission.
Making matters worse, roughly two months later, SMCI experienced a very public break-up with its accounting firm, Ernest & Young, which stated that it was “unwilling to be associated with the financial statements prepared by [SMCI] management.”
The company is not sitting idly by, however. It has conducted an internal investigation which cleared company management of misconduct, hired another accounting firm, and announced that it will submit its delayed filing by February 25. The firm must meet this deadline in order to avoid being delisted from the Nasdaq.
Believing that SMCI’s prospects will rise or fall based on the results of these audited financials, investor Bohdan Kucheriavyi cautions that it is too soon to tell which way the winds will blow.
“Super Micro Computer’s stock is at a turning point, awaiting audited earnings reports by February 25 to avoid delisting,” explains the 5-star investor.
Kucheriavyi is quick to mention SMCI’s commercial successes, as its latest available earnings report from Q4 FY 2024 demonstrated robust revenue growth of 143.6% year-over-year. The investor further details that SMCI stands ready to capitalize on the deepening demand for AI infrastructure.
“As the data center infrastructure equipment business is expected to triple in size by the end of the decade, Super Micro has plenty of opportunities for growth thanks to its servers with liquid cooling systems,” Kucheriavyi notes.
However, all this assumes that SMCI can get its internal affairs in order, says the investor, as the risk of being delisted, with all the negative implications it carries, remains very real.
It all comes down to the contents of the audited report, concludes Kucheriavyi, making it too soon to tell which direction company shares will move. The investor is therefore content to sit on the sidelines for now, giving SMCI a Hold (i.e. Neutral) rating. (To watch Bohdan Kucheriavyi’s track record, click here)
It seems that Wall Street also prefers this wait-and-see approach. With 1 Buy, 5 Hold, and 2 Sell ratings, SMCI holds a Hold (i.e. Neutral) rating. Its 12-month average price target of $27.75 would yield losses ~10%. (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.
