Super Micro Computer (SMCI) stock fell 2.5% on Thursday after rising as much as 9% the previous day, as investors wavered between optimism over the company’s strong financials and caution over regulatory risks. It’s been a roller coaster of a week.
Supermicro is reportedly under investigation by the Justice Department for alleged shady business practices outlined in a scathing report released in late August by short-seller Hindenburg Research. This weighed on the stock price, which has remained below $50 per share ever since.
This week, SMCI rose on positive reports from AI server makers. Supermicro soared 16% on Monday after the company released numbers showing strong demand for its products. The stock price on Thursday was up 12% from the previous week.
Super Micro makes servers with Nvidia (NVDA) AI chips for data centers that power artificial intelligence software. The company said it ships more than 100,000 Nvidia GPU-powered servers each quarter “to some of the largest AI factories ever built.”
And on Tuesday, SMCI stock fell 5% after encouraging premarket gains that sent the stock up as much as 7%. Futurum Group CEO Daniel Newman said investors’ excitement over Supermicro’s shipment data has faded given Supermicro’s regulatory risks.
“I think it’s unlikely that one piece of good news will undo months of extensive financial and regulatory scrutiny of these companies,” Newman said.
The Hindenburg report in August accused Supermicro of accounting fraud, undisclosed relationships between its CEO and business partners, and violations of U.S. export bans. For example, Hindenburg said Supermicro shipped servers to sanctioned Russian companies through shell companies, some of which were likely used by the Russian military for its war with Ukraine.
The day after Hindenburg released its report, Supermicro shares fell 20%. The company also postponed filing its annual 10-K report with the U.S. Securities and Exchange Commission. Supermicro’s woes continued with the Wall Street Journal’s coverage of a suspected Justice Department investigation, and its stock price plummeted in late September.
Supermicro CEO Charles Liang said the Hindenburg report contained “false or inaccurate statements” and “misleading representations of information previously shared publicly.” Ta. Liang said the delay in the company’s 10-K filing will not affect the company’s fourth-quarter results, adding that Supermicro will address Hindenburg’s allegations “in due course.”
(Photo illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)
Supermicro’s stock price rally this week illustrates the tension between its potential as a central figure in the AI boom and regulatory hurdles.
story continues
“This is high-risk reward,” Newman said. “If they are exempt from all of this, there is a very good chance that we will see a very good uptrend,” among Wall Street analysts tracked by Bloomberg and covering the stock. 7 people have rated the stock as a “buy” and 11 have maintained a “hold” rating on the stock. Only one analyst recommends selling the stock.
Analysts expect the stock to rise to $66 over the next 12 months.
The company reported mixed results in its last earnings report. Supermicro’s most recent quarterly sales for the three months ended June 30 were $5.3 billion, barely meeting Wall Street expectations but up 143% from a year ago. Meanwhile, Supermicro’s fiscal fourth-quarter earnings per share were $0.63, well below analysts’ consensus estimates of $0.83, according to Bloomberg data.
In an Oct. 3 note, Argus Research analyst Jim Kelleher advised investors to buy on the edge, saying Supermicro “has grown sales and profits much faster than the tech industry in recent years.” pointed out. Wall Street expects Supermicro to report $6.5 billion in revenue for the period ending Sept. 30, up 206% from a year ago. The company has not yet confirmed the date for its next earnings release.
“At this point, we are assuming that any accounting irregularities, if any, are minor and can be addressed by requiring reissue of the financial statements,” Kelleher said, adding that Supermicro recently reported on Oct. It also added that it had conducted a 10:1 stock split. This widens the potential investor base, which should be positive in the long run. ”
Despite his long-term optimism, Kelleher lowered his 12-month price target from $100 to $70.
Laura Bratton is a reporter for Yahoo Finance.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
