Super Micro Computer Shares Fall as Analysts Downgrade Stock
Shares of Super Micro Computer (SMCI) dropped on Friday after J.P. Morgan analysts downgraded the server maker’s stock, citing concerns over the company’s delayed annual report.
Analysts Downgrade Super Micro’s Stock
J.P. Morgan analysts downgraded Super Micro’s stock from “overweight” to “neutral” and cut their price target to $500 per share from $950. They believe that the delay in the release of the company’s annual report could have an impact on customer behavior and cause an overhang in the market.
The analysts recommend that new investors remain on the sidelines until the regulatory uncertainty is resolved. They believe that there is not a clear rationale for new investors to buy into Super Micro’s stock until the company’s regulatory issues are resolved.
Delayed Annual Report and Customer Response
Super Micro recently announced that it is delaying the filing of its annual report with the Securities and Exchange Commission (SEC) to ensure the effectiveness of its internal controls over financial reporting. This is not the first time that the company has experienced a delay in its annual report.
J.P. Morgan analysts believe that the delay could have an impact on customer behavior. Customers may be looking for better prices from Super Micro or may be hesitant to invest in the company until the regulatory uncertainty is resolved.
The analysts also note that the delay could cause an overhang in the market. This means that there could be a surplus of shares available for sale, which could put downward pressure on the stock price.
Stock Performance and Analyst Recommendations
Super Micro’s shares were down about 6% to near $389 apiece following the downgrade. However, the stock is still up approximately 35% this year. The mean price target for the stock, according to Visible Alpha, is just above $450.
Analysts at J.P. Morgan believe that the stock should be valued more similarly to other hardware manufacturers with lower growth trajectories to account for the uncertainty surrounding the delayed annual report.
They recommend that new investors remain on the sidelines until the regulatory uncertainty is resolved. They believe that there is not a clear rationale for new investors to buy into Super Micro’s stock until the company’s regulatory issues are resolved.
Previous Challenges and Short Seller Report
Super Micro has faced challenges in the past, including lackluster earnings and a report from short seller Hindenburg Research accusing the company of “accounting manipulation, sibling self-dealing, and sanctions evasion.”
When the report was released, J.P. Morgan analysts stated that they believed there was limited evidence of problems with Super Micro’s accounting. They also noted that other issues raised, such as not communicating sales properly to investors, do not immediately suggest any wrongdoing.
Conclusion
Super Micro Computer’s stock has been downgraded by J.P. Morgan analysts due to concerns over the company’s delayed annual report. The analysts believe that the delay could impact customer behavior and cause an overhang in the market. They recommend that new investors remain on the sidelines until the regulatory uncertainty is resolved. Super Micro’s stock is still up this year, but the mean price target is just above $450. The company has faced challenges in the past, including lackluster earnings and accusations of accounting manipulation. However, J.P. Morgan analysts believe that there is limited evidence of problems with Super Micro’s accounting and that the issues raised do not suggest any wrongdoing.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. Investing in stocks involves risks, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions.
