Super Micro Computer Is Now NASDAQ Compliant—But Is It a Buy?

Key Points

• Super Micro Computer has been one of the most talked-about tech stocks in the market over the past few years.
• The AI server company recently saw its shares boost after avoiding NASDAQ delisting, although this was short-lived.
• Is Super Micro Computer's stock now a buy with an important risk event avoided and shares down?

Super Micro Computer NASDAQ: SMCI, a leader in AI technology, recently dodged a bullet. The company risked removal from the NASDAQ stock exchange. The company's accounting practices caused big problems, which made it delay several filings.

Luckily, the firm met the deadline to complete these filings, preventing its delisting from the NASDAQ.

So, now that Super Micro has made good on this obligation, what are the future prospects for the stock? Is there now an opportunity for its shares to experience significant appreciation? I’ll break down important aspects of the company’s business to answer this question.

Detailing the Market Reaction to SMCI’s Filing Win

After regaining NASDAQ compliance, Super Micro shares jumped over 12%. Notably, the company did not have to issue any restatements to its previously filed reports. This was a very good development. The company’s accounting concerns could have meant it needed to correct the numbers from its previous reports.

Still, since this event, shares of Super Micro Computer are down nearly 24% as of the Mar. 5 close. This shows that there are still significant concerns about the company. Becoming up to date on its filings was far from the only thing markets want to see to become bullish on this stock again.

Reactions to this news from Wall Street analysts were somewhat mixed. Goldman Sachs raised its price target by 11% to $40 per share. Barclays reinstated coverage with a $59 target. Loop Capital was notably the most bullish of these three analysts, raising its target by a whopping 40% to $70. The firm's Mar. 5 closing price was just under $39. Compared to this, the average of these price targets implies significant upside in Super Micro shares of nearly 45%.

Financial Deep Dive: Where Super Micro Has Been and May Go

In calendar Q4 2024, Super Micro saw impressive revenue growth of 55%. However, this is a notable deceleration from the previous four quarters, which showed growth of over 100%. In calendar year 2025, expectations of revenue growth sit at 60% versus 125% growth in 2024. Gross margins dropped nearly 400 basis points from 2023 while operating margins slipped 140 basis points.

Analysts expect these figures to continue sliding by around 200 basis points in 2025. Still, analysts project that adjusted earnings per share (EPS) will increase by 17%.

Super Micro is a maker of AI server racks. It places advanced chips into these racks and then sells them to data centers. This business is notably low-margin because of the massive pricing power suppliers like NVIDIA NASDAQ: NVDA have. However, Super Micro gains a lot from its partnership with NVIDIA.

Customers want their products because NVIDIA has teamed up with them. Super Micro notably has an advantage over other competitors in this space for those who need the best performance possible. Its advanced liquid cooling systems add significant value to customers, and it still has a leg up on the competition.

However, even with this strong position, the company still generated cash from operations of -$2 billion over the last 12 months. This is largely due to mismatches between when it has to pay suppliers and when it gets paid. The company is still profitable on an operating and net income basis.

Even with revenue growth so high in some of the past quarters, profit margins are not overly impressive. Its operating margins hover around 10% or lower. Its gross margin was in the mid to high teens during this massive growth period. With growth expected to slow considerably, margins are expected to take a hit. This shows that the company's competitive advantages might not be as strong as many believe. The company could struggle to grow profits significantly as growth declines.

SMCI: Near-Term Appreciation in Play, But Long-Term Prospects Are Risky

When looking at the company’s valuation multiples, they all sit basically in the middle of the pack over their range for the past three years. Given the ongoing growth in demand for AI servers, Super Micro shares could see a notable increase in value within the next year.

Price targets from Wall Street support this notion. However, the company’s weak profits and cash flow during its peak growth stage raise doubts about its value as a long-term investment. 

Concerns over management transparency are still there. Fixing recent accounting and filing issues doesn't absolve management of earlier mistakes. An extended pattern of management transparency and consistently higher margins would boost confidence in Super Micro's ability to be a strong long-term investment.