Super Micro's Delayed Filing: A Warning or an Opportunity?

Key Points

• Super Micro Computers shares are down significantly from their peaks in early 2024 but are expected to rebound in 2025.
• Risk remains but is offset by business strength, which is accelerating because of AI. 
• Analysts have lowered their price targets but continue to see a high double-digit upside for this market. 

Super Micro Computer's NASDAQ: SMCI delayed annual filing is a warning to investors that something isn’t right. However, the stock is down 65% from its highs, suggesting the absolute worst has been priced in.

The takeaway for investors is that volatility will likely plague the price action for the remainder of the year, but this stock is cheap and likely to find its bottom soon. It is a leading provider of data centers and AI-specific servers, an industry booming in 2024. 

Analysts Are Lowering the Bar for Super Micro Computers

Analysts are lowering the bar for Super Micro Computers in FQ1, with most analysts reducing their estimates for revenue and earnings. Still, the consensus figure assumes a 22% sequential growth in revenue, with YoY growth accelerating to over 200% and earnings to follow suit. The estimates may be cautious, with whisper figures leading to the range’s low end and results from Oracle NYSE: ORCL and NVIDIA NASDAQ: NVDA both strong. 

NVIDIA, the primary source of chips used to build SMCI data centers and AI-specific servers, has seen demand for its products double twice over the last year as demand from the data center hyperscalers scales higher. Oracle, the leading provider of database infrastructure for AI, referenced its soon-to-be 160+ next-gen data centers housing “acres” of NVIDIA GPU clusters, many of which will be made by Super Micro Computers.

Among the opportunities for Super Micro Computers is market share gain. The company is estimated to hold 10% of the dedicated AI server market share, which is expected to grow to over 17% within the next two years.

Analysts have also lowered the bar for share prices. However, their activity aligns with a resetting of expectations rather than a reversal in sentiment.

The consensus price target is down 17% over the last quarter but up 175% compared to the previous year and still 85% above the recent lows.

The latest activity is leading to the range's lower end, but most recent revisions have the stock trading above $500 with a consensus of revisions since the last earnings report at $635 or a 45% gain from $435. 

Institutions Call the Bottom in Super Micro

Risk or not, the delayed filing did not hinder the institutions that had been buying the stock in bulk in Q3. The Q3 activity continues a trend that has seen buying activity ramp higher over the past several quarters to set a multi-year high. Data tracked by MarketBeat shows that international holdings are topping 80% and rising, providing a strong tailwind for the market. Assuming no change in that trend, the price action in SMCI could begin to rebound soon. The fiscal Q1 earnings report is due in late October. 

Short-sellers remain a risk for SMCI shareholders. They allege accounting improprieties that may come to light when the past year’s annual report is filed. As it is, the short interest rate was nearly 15% in the last report and sufficient to weigh on the price action. On the flip side, filing the report may also alleviate suspicion and lead to a short-covering rally or squeeze. 

Super Micro Computer is Near Rock Bottom

Super Micro Computer's stock price decline retraced nearly 100% of the 2024 rally, suggesting it is near rock-bottom prices. The price action shows support above the previous highs and is oversold, suggesting the rebound could begin soon, but that is relative. There is opportunity here, but also risk. Without a catalyst, the market is as likely to head lower as higher and could retreat to $350 or lower before finding solid support. The risk is heightened because SMCI has a history of accounting issues.