Super Micro Computer Stock Warning: Analyst Warns of 1 Key Risk

Super Micro (SMCI) has avoided a delisting from the Nasdaq Exchange, effectively removing an overhang that plagued its share price for months. Still, shares of the artificial intelligence (AI) server company can’t seem to catch a break. 

SMCI stock has tanked more than 25% in the past five days – and it may not recover anytime soon, according to a Goldman Sachs analyst. 

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The investment firm’s “Hold” rating on Super Micro Computer is coupled with a $40 price target that’s roughly in line with its current trading price. 

Why Is Goldman Sachs Dovish on SMCI?

Goldman Sachs analyst Michael Ng reiterated his neutral stance on Super Micro stock on Friday, saying the company will face challenges in improving its profit margins amidst a focus on gaining market share. 

Additionally, he sees customer concentration as a real risk for SMCI since it relies heavily on a handful of customers for revenue. 

If one or more of its key customers lowered spending on its products or switched to a competitor, the impact on Super Micro Computer’s overall financial performance could be substantially negative, the analyst argued in a research note today. 

Insiders Plan on Selling Supermicro Stock 

Super Micro shares remain unattractive despite the recent pullback because insiders seem to be losing conviction as well. 

Sara Liu – one of the company’s cofounders – filed notice with the Securities and Exchange Commission this week, indicating plans to unload more than 46,000 shares of Super Micro Computer Inc. 

Her filing was followed by a similar one from George Kao, the senior vice president of operations at SMCI. Kao reportedly wants to sell more than 1.5 times as many shares of Super Micro as Liu.

Not Everyone Is Giving Up on Super Micro Computer

Investors should note, however, that Goldman Sachs has somewhat of a contrarian view on SMCI stock. 

The mean target on Super Micro Computer still sits at $53, indicating potential upside of 30% from current levels, which means buying the dip in SMCI stock could prove to be a smart move after all. 

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On the date of publication, Wajeeh Khan 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.