Concerns about Super Micro Computer (SMCI 0.50%) have been mounting among investors. Falling profit margins, concerns about accounting procedures, and the delay in Supermicro filing its 10-K annual report all hit the stock in recent weeks.
Now, Barclays analysts George Wang and Tim Long are warning investors to step back from the stock as recent issues play out. The analysts lowered their rating on Super Micro stock from the equivalent of a buy rating to one of a hold in a recent report. They also cut their price target from $693 to $438 per share.
Anxiety over accounting questions
This is a reaction to lower profit margins reported by the supplier of artificial intelligence (AI) servers in its fiscal fourth quarter, as well as concerns over the company's accounting. Those concerns began after accusations in a short-seller report and the company's own delay in the release of its Form 10-K annual report.
Those issues helped create a sell-off that has cut Super Micro's share price by more than one-third in the last month.
NASDAQ: SMCI
Key Data Points
The company itself has sought to soothe nerves. CEO Charles Liang published a letter to customers and partners this week, attempting to reassure them that the business is operating at full capacity and has been shipping market-leading volumes of highly sought liquid cooling AI server racks.
He also reiterated that while the company is reviewing its financials, it doesn't expect any material changes "based on the work done so far." Liang also said the short-seller's report contained "false or inaccurate statements." But that doesn't mean investors should jump back in right now.
The Barclays analyst team put it this way:
We would like to see more transparency in financial disclosure in terms of quarterly order intake and backlog. While we continue to be positive on the long-term prospects related to AI, we believe the current risk/reward is balanced for SMCI.
That's a prudent summary laying out the current uncertainty. Until there's more clarity, it makes sense for investors to watch and wait. It's not time to sell, but neither is it time to buy.
