Super Micro Computer (SMCI 1.18%) stock is losing ground in Tuesday's trading. The company's share price was down 5.9% as of 3:15 p.m. ET and had been down as much as 9.9% earlier in the day's trading.
NASDAQ: SMCI
Key Data Points
Supermicro is falling on the heels of recent coverage on the stock from J.P. Morgan. While J.P. Morgan's analysts said that orders for Supermicro's servers continued to be robust despite recent controversies surrounding the company, it maintained an underweight rating on the stock and a one-year price target of $23 per share.
J.P. Morgan remains bearish on Supermicro stock
J.P. Morgan's analysts recently met with Supermicro's management and came away with some encouraging conclusions. The analysts believe that Supermicro has seen no significant loss of orders to competitors despite some reports suggesting that this was occurring. The company said that it was planning to release new products in 2025 and that production at its Malaysia plant is on track to begin scaling up in the first half of next year.
Supermicro said that it had sufficient working capital to deliver production needed to generate quarterly revenue between $5.5 billion and $6 billion, and it expects to see tailwinds in conjunction with the ramp-up of Nvidia's next-generation Blackwell processors for artificial intelligence (AI). But despite some promising indicators and catalysts on the horizon, J.P. Morgan's one-year price target of $23 per share implies downside of roughly 45% compared to the stock's current level.
What's next for Supermicro?
J.P. Morgan's bearish outlook on Supermicro stock highlights recent challenges facing the company. Despite the company's near-term performance outlook appearing solid, recent controversies have caused the server specialist's share price to be highly volatile -- and some investors are concerned that unfolding developments could spur another wave of big sell-offs.
After Ernst & Young resigned as Supermicro's financial auditor in October, the tech company brought on BDO as its replacement. Having an auditor on board means that the company has been able to move forward with work on filing its delayed 10-K report for the last fiscal year. As a result, the company was able to submit a filing plan to Nasdaq that prevented its stock from being delisted.
Nasdaq accepted the plan last week, and attention now turns to what shows up in Supermicro's 10-K filing and subsequent fiscal reports. The company expects to have all of its required reports filed by Feb. 25.
If Supermicro winds up having to significantly restate its past results, the company's share price could plummet. The company is also reportedly being investigated by the Department of Justice. So while the tech specialist's core business appears to be seeing encouraging demand, the stock isn't out of the woods yet.
