Super Micro Computer (SMCI) faces critical scrutiny as it approaches a Feb. 25 deadline to file its delayed financial reports with the SEC, amidst regulatory hurdles and allegations of accounting irregularities from Hindenburg Research.
Super Micro faces scrutiny ahead of SEC filing deadline
The San Jose-based company, specializing in high-performance, energy-efficient server solutions, has a market cap of $28.1 billion. Concerns over governance and investor report delays have contributed to a nearly 61% decline from its highs in March 2024. SMCI had experienced a significant drop in 2024, plummeting as much as 80% following regulatory issues, including a delay in filing its annual 10-K report and reports of financial misconduct. The company was previously delisted from the Nasdaq in 2018 due to similar issues, regaining its listing in 2020.
On Feb. 11, CEO Charles Liang reassured investors that SMCI is working diligently to meet the Feb. 25 filing deadline for its fiscal 2024 annual and first two quarterly reports for fiscal 2025. The stock has seen significant gains recently, climbing 113% over the past three months and a remarkable 97% year-to-date, greatly outpacing the S&P 500’s 4% gain.
Super Micro Stock is on fire: Up 32% in a week and this could be just the start
The last earnings report, released on Aug. 6, showed 143.6% year-over-year revenue growth, totaling $5.3 billion. However, the company’s adjusted earnings per share of $6.25 fell short of expectations, alongside a concerning drop in gross margins to 11.2% from 17% reported in the same quarter the previous year.
Despite the challenges, Super Micro has projected net sales for Q2 fiscal 2025 between $5.6 billion and $5.7 billion, marking a 54% year-over-year growth at the midpoint. Gross margins are expected between 11.8% to 11.9%, with adjusted earnings per share anticipated to be between $0.58 and $0.60, indicating a modest 5% year-over-year growth. The company estimates around $1.4 billion in cash and cash equivalents, while its total debt stands at approximately $1.9 billion. The fiscal 2025 revenue forecast has been revised to between $23.5 billion and $25 billion, down from earlier guidance of $26 billion to $30 billion. However, the outlook remains optimistic with a projected revenue of $40 billion for fiscal 2026.
Analyst sentiment towards SMCI is currently mixed, with a consensus rating of “Hold.” Among 13 analysts, two recommend a “Strong Buy,” two suggest a “Moderate Buy,” seven give a “Hold” recommendation, and two maintain a “Strong Sell” rating. The average price target sits at $52.68, suggesting approximately a 10% upside from current levels, while the highest target of $100 indicates a potential increase of 108.7%.
Super Micro stock has seen substantial growth, increasing from about $4 per share in February 2022 to approximately $56 today, largely driven by rising demand for server systems linked to generative artificial intelligence advancements. The valuation currently stands at about 25x estimated trailing earnings and 15x projected FY 2026 earnings, with expectations that earnings will nearly double in the next few years.
Super Micro has recorded annual gains for the last four years, achieving returns of 39% in 2021, 87% in 2022, 246% in 2023, and 7% in 2024. The company anticipates nearly 60% revenue growth in FY 2025, bolstered by substantial investments in AI and data center technologies.
Amidst increasing demand for high-performance computing and potential revenue growth of approximately 70% in FY 2026, Super Micro is also expected to enhance its product offerings with liquid-cooling systems, which will begin featuring in 30% of its shipments.
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