Tech Turmoil: Can Super Micro Computer Rebound from 78% Crash?
The artificial intelligence hype cycle may be reaching its peak, and Super Micro Computer (NASDAQ: SMCI) is feeling the pinch. With shares plummeting 78% from their all-time high in March, investors are left wondering if this tech stock can recover.
Accusations and Auditor Resignation Raise Red Flags
The trouble began in late August when short-seller Hindenburg Research released a report alleging accounting manipulation, self-dealing, and evasion of sanctions related to Russia’s invasion of Ukraine. The situation took a turn for the worse when Supermicro’s auditor, Ernst & Young, resigned, citing concerns about management’s representations and the accuracy of financial statements.
Justice Department Investigation Adds to Uncertainty
To make matters worse, Supermicro is reportedly being investigated by the Justice Department, which is reaching out to former employees and others. While these developments may not directly impact Supermicro’s operations, they could erode investor confidence and lead to potential fines if management is found guilty of wrongdoing.
Delisting Risk Looms Large
Supermicro’s failure to file its annual 10-K report in August has put it at risk of delisting by the Nasdaq. With no auditor and ongoing issues, the company faces a difficult road ahead. Wedbush analyst Matt Bryson believes delisting is a likely outcome, citing the tight timeline and lack of auditor.
Encouraging Preliminary Results Offer Glimmer of Hope
Despite the challenges, Supermicro released some promising preliminary news, with net sales expected to reach $5.9 billion to $6 billion in the fiscal first quarter. While lower than previous guidance, this represents 180% growth compared to the prior-year period.
Valuation Looks Attractive, but Clarity is Needed
With a forward price-to-earnings ratio of 7.65, Super Micro Computer’s stock appears undervalued. However, until the company addresses its accounting concerns and regains compliance with Nasdaq requirements, it may be wise to exercise caution.
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