All eyes on Super Micro Computer stock ahead of earnings — here’s what Matt Bryson expects

Super Micro Computer (NASDAQ:SMCI)what was once one of the market’s biggest winners riding the AI ​​hype wave has been caught up in so much drama lately that it’s hard to keep track. In the past week alone, the share has almost halved in value and is now 78% below its peak value from earlier this year.

The recent meltdown follows the resignation of auditor Ernst & Young shortly after SMCI announced a delay in filing its annual 10-K report. Adding to the uncertainty, reports suggest the company is also under investigation by the Department of Justice.

All of which makes today’s first-quarter financial results (available after the close) return to a more pertinent question from investors: what the hell is going on here?

More specifically, says Wedbush’s Matt Bryson, an analyst ranked in the top 2% of Wall Street equity experts, investors want to know whether SMCI can prevent the stock from being delisted.

As of Sept. 17, the company was given 60 days to submit a viable plan to NASDAQ to regain compliance by filing its 2024 10-K. If NASDAQ approves SMCI’s plan, it could give it up to 180 days from the original Aug. 29 deadline to file the 10-K. But with the company now without an auditor, Bryson believes it “probably appears to be an uphill battle for SMCI to remain publicly traded at this point.”

Another relevant question that needs to be answered is whether there is a major problem with finances and management behaviour. The company had previous accounting issues, but these were minor, involving only small revenue shifts between quarters, with the primary issue in 2018 being the delisting. SMCI has said it does not expect to need to restate its 2024 quarterly reports, suggesting “there are no issues with finances.” But EY’s resignation and the WSJ article hinting at a DOJ investigation, Bryson suggests, “investors need to take into account the risk that a larger problem could exist.”

Finally, investors want to know if the company can keep its 2024 sales forecast as is, and given all the news flow, how will that affect the business? Prior to the recent issues, there were indications that demand for liquid cooling was not as strong as expected, while Bryson notes “mixed feedback” on whether concerns about the late filing and the reported DOJ investigation are affecting customers’ decisions.

“However, on net,” the 5-star analyst summed up, “given the above, we are more cautious about SMCI’s ability to meet/exceed FQ1 expectations or guide consensus for FQ2.”

Bottom line, Bryson gives a neutral rating on SMCI stock, while lowering his price target from $62 to $32. Still, there is potential upside of ~21% from current levels. (To see Bryson’s track record, click here)

Among his peers, 9 other analysts join Bryson on the sidelines, while 3 more Buys fail to change a Hold consensus rating. Meanwhile, some analysts have yet to update their SMCI models and as such the average price target remains very bullish; at $61.76, the number leaves room for a one-year return of ~132%. (See SMCI Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.