After a meeting with Super Micro Computer (SMCI, Financial)'s management, J.P. Morgan analyst Samik Chatterjee maintains an underweight rating on stock with positive notes listed below:
- The surge in AI infrastructure demand has helped Super Micro's share price to rise previously, and until now, Super Micro reports strong orders with no significant loss of orders to competitors.
- The company has intended to release new products in 2025 and instead of shutting down operations in Malaysia, Super Micro plans to scale up the production capacity at its plant in Malaysia in the first half of next year. The upscale is expected to contribute to bigger gross margins.
With the reasons stated above, Chatterjee believes that Super Micro is in moderate drop with $23 per share as the target price. The shares of Super Micro have fallen from its highest closing price this year of $118 in March to just $38 per December 12, 2024, for so many reasons but the company tried to manage by dodging the issues:
- Super Micro had been affected by an auditing scandal, and its previous auditor Ernst & Young, which resigned in October, expressed concerns over Super Micro's corporate governance including its accounting practices and transparency. However, the opinion was rejected because Super Micro was cleared without any proof of fraud or misconduct done by the company's management.
- There has been delays in the financial reports filing that has shaken the confidence of investor afraid of the stock will be delisted from NASDAQ. But Charlie Liang, the CEO of Super Micro, during the Reuters NEXT conference reassured the market saying that Super Micro would meet the Nasdaq deadline of filing its financial reports to the US Securities and Exchange Commission before February 25, 2025.
