Super Micro Computer (SMCI) stock is down more than 27% this morning following the resignation of its auditor, Ernst & Young, due to concerns over governance and transparency. This resignation follows previous allegations of accounting manipulation by short seller Hindenburg Research, along with reports that the company is being probed by the U.S. Department of Justice in relation to its internal accounting controls.
Super Micro has delayed its annual 10-K filing and is in the process of finding a new auditor while a special committee reviews its internal controls. In a filing about today's news, SMCI said it “does not currently expect that resolution of any of the matters raised by EY… will result in any restatements of its quarterly reports for the fiscal year 2024 ending June 30, 2024, or for prior fiscal years.”
SMCI's market capitalization is $27.5 billion, with a market-beating one-year return of 50% highlighting its strong past performance. After establishing itself as one of the market’s top-performing artificial intelligence (AI) stocks earlier in 2024, SMCI has now spiraled to a loss of 71% from its March highs.
In today's trading, SMCI is on pace for its biggest daily drop since October 2018.
Despite the stock’s brutal performance lately, SMCI still carries a higher premium than its competitors. The shares are valued at a forward price-to-sales ratio of 1.03, while AI server rivals Hewlett-Packard (HPE) and Dell Technologies (DELL) are valued at less than 1x forward sales - and unlike SMCI, both DELL and HPE pay dividends. This suggests that SMCI still isn’t exactly a bargain at current prices, especially given the ongoing lack of clarity regarding the company’s accounting situation.
While Super Micro has reported substantial growth driven by its AI server solutions, analysts have flagged concerns about gross margin pressures and competitive challenges in the AI infrastructure market. The ongoing legal and regulatory issues, coupled with the immediate need to restore investor confidence, present significant challenges for SMCI in the short term.
For investors in search of AI infrastructure stocks, here are three ideas from analysts at Oppenheimer.
This article was generated with the support of AI and reviewed by an editor. On the date of publication, the editor had a position in: SMCI . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
