Super Micro Computer May Have Avoided a Major Risk. Is This Beaten-Down Stock a Buy?
Super Micro Computer (NASDAQ: SMCI) started the year with plenty of promise. The stock soared 188% in the first half, even beating market darling Nvidia, thanks to its dominance in the artificial intelligence (AI) equipment market. Investors piled into the stock as the company reported record demand for its data center equipment from AI customers — and that resulted in triple-digit revenue growth.
But troubling news started to pile up a few months ago, halting Supermicro’s fantastic momentum — and the shares plummeted. One major issue was the company’s announcement that it would delay the reporting of its 10-K annual report, and this called into question its ability to remain listed on the Nasdaq. To make matters worse, Supermicro’s auditor resigned in October, making it impossible for the company to proceed with its financial filings.
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Positive news arrived this week, though, sending the shares soaring and igniting investors’ hopes for an exciting recovery story. Supermicro said it’s hired independent auditor BDO U.S.A. and has submitted a compliance plan to the Nasdaq. With these moves, Supermicro may have avoided a major risk — delisting from the Nasdaq. Does the news make this beaten-down stock a buy? Let’s find out.
First, let’s walk through the complete Supermicro story. The company, as mentioned, makes equipment like servers and workstations for data centers, and AI customers have been rushing to order as they build out their operations. This helped Supermicro report quarterly revenue this year that surpassed a full year of revenue as recently as in 2021. And this also has pushed the stock higher, not only in the first half but over the past few years — it’s climbed more than 800% over five years.
Supermicro also works hand-in-hand with the biggest chip designers, immediately incorporating their latest innovations into its systems. This means the company could benefit from their successes too, such as Nvidia’s upcoming Blackwell launch.
But questions about Supermicro’s financial reporting arose in recent months, weighing on the stock. Hindenburg Research released a short report, alleging “glaring accounting red flags” and other problems at the company. The Wall Street Journal then reported a Justice Department Probe into the company — Supermicro and the U.S. attorney’s office declined to comment.
Finally, Ernst & Young resigned as Supermicro’s auditor, citing concerns about the company’s accounting practices. Meanwhile, Supermicro already had delayed its 10-K annual report — and received a non-compliance letter from Nasdaq.
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