- Super Micro Computer disclosed plans to stay listed, sending the stock soaring.
- Despite challenges, the company projects significant revenue growth and remains attractively valued under current prices.
- Analysts are cautiously optimistic but highlight the need for resolving accounting issues and securing Nasdaq approval.
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Super Micro Computer (NASDAQ: SMCI) has a plan to maintain its stock listing. This news has reignited optimism among investors, propelling the stock to soar by as much as much s 27% at the time of writing, following a 15.93% gain in yesterday's session on Wall Street.
The company, known for its IT solutions across various technology sectors, has appointed BDO USA as its new auditor. It has also submitted a plan to Nasdaq, which top management believes will enable it to submit both its annual report for the year ending June 30 and its quarterly report for the period ending Sept. 30.
As the stock strives to remain listed, investors are left pondering a crucial question: Is it worth the risk at current price levels?
A Roller Coaster for Investors
Super Micro started the year on a positive note, having been included in the S&P 500. However, since March, the company has faced several setbacks due to unfavorable margin forecasts.
Adding to the challenges, a report from the short-seller Hindenburg raised concerns about the company's reporting practices. Despite SMCI's dismissal of these allegations, the accounting issues led to the resignation of EY as the auditing firm. This development resulted in the stock tumbling over 82% from its peak of $122.9 on March 3.
1-week chart of SMCI shares over the past year - Source: Investing.com, data as of close of Nov. 18
What to Expect Now
The future of the IT solutions company hinges on several factors, and delisting remains a possibility, making it challenging to provide precise short-term forecasts for the stock. However, an analysis of available data and background information can shed light on the company's financial prospects.
Supermicro is currently trading at a reasonable price-to-earnings (P/E) ratio of 10.4x, considering its earnings growth. This valuation appears relatively attractive when compared to industry peers and its growth rates.
For the first quarter of fiscal year 2025, SMCI's preliminary net revenues are projected to grow by 181% year-on-year, despite falling short of analysts' estimates. Potential downward revisions may position the company to positively surprise the markets once its accounting issues are resolved.
As for future growth, recent developments in liquid-cooled SuperClusters for AI data centers, featuring NVIDIA (NASDAQ: NVDA)'s Blackwell systems, present promising prospects with new energy-efficient computing models.
Analysts Remain Optimistic About SMCI's Growth Potential
Analyst ratings offer additional optimism. Despite lowering the target price after accounting challenges, many analysts continue to forecast a rise in the stock over the next 12 months. On average, the target price is set at $40.32, representing a more than 87% increase from the $21.54 per share recorded at the close on Nov. 18.
However, there's cautious sentiment in the market, as evidenced by 6 "Hold" ratings, in contrast to 3 "Buy" and 2 "Sell" ratings.
Source: Investing.com
Based on a fair value analysis, the stock would be valued at $25.13 per share. This offers a potential upside that is less than the target price and could be fully realized if the pre-market rebound holds at the session's close.
It's well-known that the stock has experienced significant volatility in recent months, a trend that is expected to persist in the near future.
The Future Remains Uncertain
Even if today's session confirms SMCI's upward trend, the stock is still far from the highs it reached a few months ago. According to broker analyses, this presents an intriguing buying opportunity.
However, investing now entails a high risk and exposure to rapid price fluctuations.
While SMCI's plans are progressing, it still faces challenges in proving its ability to stay at the forefront of the AI revolution.
For the company, led by Charles Liang, to avoid delisting, it first needs Nasdaq's approval on its compliance plan. Following that, Supermicro must successfully complete the audits and make the necessary filings, showcasing the strength of its fundamentals.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest and is not intended to incentivize asset purchases in any way. I would like to remind you that any type of asset is evaluated from multiple perspectives and is highly risky; therefore, any investment decision and associated risk remains with the investor.