Title: Why Super Micro's Stock is Tumbling Today
Super Micro Computer (SMCI) stocks are losing steam in today's trading, with a 5.9% drop as of 3:15 p.m. ET, and hitting a low of 9.9% earlier in the day. The downturn follows recent analysis from J.P. Morgan, which while acknowledging healthy server orders despite controversies, maintained an underweight rating and projected a $23 per share price target, implying a potential 45% decrease.
J.P. Morgan's Bearish View on Supermicro Stock
J.P. Morgan analysts held positive discussions with Supermicro management, expressing confidence in the company's order volumes and new product plans. The company anticipates launching new products in 2025 and envisions ramping up production at its Malaysia facility in the first half of 2022. Supermicro also disclosed sufficient working capital to support quarterly revenue between $5.5 billion and $6 billion. In addition, the company looks forward to market tailwinds from Nvidia's forthcoming Blackwell AI processors.
However, despite promising indicators and catalysts, J.P. Morgan's one-year price target suggests a bleak future. The bearish report by the investment bank underscores the challenges facing Supermicro. Although the company's short-term growth prospects appear promising, lingering controversies have intensified stock volatility and raised investor concerns about potential future developments.
Post-Investigation and Future Prospects
Following the resignation of its long-term auditor, Ernst & Young, in October 2024, due to serious concerns regarding internal controls and accounting practices, Supermicro appointed BDO USA as its new auditor. Subsequently, Supermicro submitted a filing plan to Nasdaq, preventing delisting. Last week, Nasdaq accepted the plan, with Supermicro aiming to file its required reports by February 25, 2025.
If Supermicro remains incompliant with reporting requirements, stock prices could plummet, and the Department of Justice (DOJ) investigation could eventually result in fines, penalties or other regulatory actions. However, the company's strong demand for AI computing servers and its competitive edge in liquid-cooled technology may offer some respite, as long as Supermicro can regain market confidence and address the issues at hand.
In light of J.P. Morgan's bearish view, investors might be cautious about allocating their finance or money towards Supermicro stock, considering the potential 45% decrease in value. Despite the company's anticipated product launches and positive discussions with analysts, the investment bank's report has highlighted the challenges Supermicro faces.
To mitigate potential financial losses, investors may consider diversifying their portfolio or holding onto their Supermicro stocks, hoping for a turnaround, as the company works to regain market confidence and tackle its controversies.
