Once a high-flier in the artificial intelligence (AI) boom, Super Micro Computer, Inc. (SMCI) is now navigating choppy waters. In August, short seller Hindenburg Research unleashed a torrent of allegations, including accounting manipulations, export control violations, and self-dealing linked to CEO Charles Liang’s family-controlled suppliers.
While the initial market reaction was somewhat muted, the stock took a nosedive the next day when SMCI announced a delay in filing its annual 10-K report, citing internal control concerns. Shortly after, reports indicated that the Department of Justice was probing potential accounting irregularities at Super Micro, further pressuring the shares.
The net result of all these headlines is that by the time Super Micro executed a 10-for-one stock split at the start of this month - a move intended to lower the face value of its shares, making them accessible to a wider pool of investors - SMCI stock was already trading at quite a discount to its near-term highs.
So, while stock splits often provide a temporary boost, the spark for Super Micro Computer stock might come instead from the fundamentals. The company recently reported positive news about its liquid cooling solution, which promises to reshape data center efficiency. But as the stock remains down more than 61% from its March highs, investors are left wondering: can SMCI stage a turnaround from here? Let’s take a closer look to find out.
About Super Micro Computer Stock
Founded in 1993, Super Micro Computer, Inc. (SMCI) designs, develops, manufactures and sells energy-efficient, application optimized server solutions, including rack mount and blade server systems, and related components. Headquartered in San Jose, the company leverages in-house expertise in motherboard, power, and chassis design to produce next-gen solutions for customers worldwide.
With operations in the U.S., Taiwan, and the Netherlands, Super Micro aims to scale efficiently to meet global demands while reducing environmental impact through its green computing initiatives. The company’s award-winning Server Building Block Solutions offer flexibility to allow clients to tailor systems precisely to their workloads, from processors to advanced cooling options.
The company’s market cap currently stands at $26.7 billion, and Super Micro made its entrance into the prestigious S&P 500 Index ($SPX) in March, replacing Whirlpool Corporation (WHR). Just a few months later, in July, SMCI achieved another major milestone by securing a spot in the Nasdaq-100 Index ($IUXX), solidifying its place among the market’s biggest and most influential companies.
After peaking at $122.90 in March, SMCI stock has tumbled more than 61%. Even with this sharp pullback, the stock is up 91.5% over the past year and an impressive 67.5% on a YTD basis, easily surpassing the broader SPX’s 38% annual gain and 22% YTD growth.
In terms of valuation, Super Micro is priced at 14.37 times forward adjusted earnings and 1.00 times forward sales, which represents a discount to the tech sector median on both metrics. In other words, now might be a good time to scoop up SMCI stock at a relative discount.
Super Micro Crashes After Q4 Earnings
After Super Micro released its fiscal 2024 Q4 earnings results on Aug. 6, which missed Wall Street’s bottom-line forecasts, SMCI stock crashed more than 20% in the following trading session.
Super Micro posted adjusted earnings of $6.25 per share, or $0.63 per share on a split-adjusted basis, reflecting a strong 78.1% annual growth - but fell short of analysts’ expectations by a sizable 23.2% margin.
Additionally, the company reported a sharp drop in gross margin, which declined to 11.2% from 17% a year ago and 15.5% in fiscal Q3. This dip in profitability seemed to contrast with CEO Charles Liang’s statement about record demand for Super Micro's new AI infrastructure.
As a result, even with net sales soaring a remarkable 143.6% year over year to $5.3 billion, and narrowly topping estimates, investors were disappointed with the quarterly results.
As of June 30, Super Micro held about $1.7 billion in cash and cash equivalents against $2.2 billion in bank debt and convertible notes.
For Q1 of fiscal 2025, management forecasts net sales between $6 billion and $7 billion, with adjusted EPS projected to range from $6.69 to $8.27. For fiscal 2025, the company anticipates net sales between $26 billion and $30 billion.
Super Micro Unveils Groundbreaking Liquid Cooling Solution
After a rough couple of months, shares of Super Micro got a much-needed shot in the arm on Oct. 7, closing up more than 15% after the company announced it has delivered over 2,000 liquid-cooled racks since June 2024, with more than 100,000 GPUs deployed “for some of the largest AI factories ever built.”
SMCI’s revolutionary liquid cooling solution (DLC) is designed to cater to the growing demands of AI factories and high-performance computing (HPC) environments. The solution includes a suite of advanced components like Coolant Distribution Units (CDUs), cold plates, Coolant Distribution Manifolds (CDMs), cooling towers, and sophisticated end-to-end management software.
This data center-scale liquid cooling technology not only maintains the desired temperatures for both GPUs and CPUs, but also significantly reduces the overall power demand for a given cluster size. By achieving up to a 40% reduction in power consumption, Super Micro enables organizations to deploy a higher number of AI servers within the same power envelope. This increased capacity is crucial for accelerating computing power and minimizing the time required to train large language models (LLMs), which is essential for large-scale AI operations.
With strong traction for its DLC technology, Super Micro is effectively reigniting investor confidence and paving the way for a promising future in the rapidly evolving AI landscape.
What Do Analysts Expect for Super Micro Computer Stock?
Earlier this month, Barclays adjusted its price target for the AI server company to reflect its stock split, which took effect on Oct. 1. The brokerage firm adjusted its target from $438 to $42, citing unchanged multiples but noted near-term margin pressures due to competitive pricing, internal control uncertainties, a delay in its 10-K filing, and a lack of visibility on GB200 orders.
In a note to clients, Barclays analyst George Wang highlighted that uncertainty surrounding internal controls and the ongoing delay in the 10-K filing have led the firm to remain cautious about Super Micro, noting, “a final resolution is tough to handicap.”
Overall, Wall Street is still optimistic about SMCI stock, with a consensus rating of “Moderate Buy.” Of the 13 analysts offering recommendations, four advise a “Strong Buy,” one suggests a “Moderate Buy,” seven maintain a “Hold,” and one advocates a “Strong Sell.”
The mean price target for SMCI is $72.81, indicating expected upside potential of around 57% from current levels.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
