Super Micro Computer (SMCI +2.14%), more commonly known as Supermicro, executed its first stock split on Oct. 1, 2024. That 10-for-1 split reduced its trading price from $416.40 to about $41.64 per share, while its market cap remained nearly unchanged at $24 billion.
But today, Supermicro trades at about $37 with a market cap of $22 billion. Let's see why its stock pulled back after its stock split and if it will ever rally high enough to be split again.
Why did Supermicro's stock slump after its stock split?
Supermicro produces servers for data centers. That's a commoditized market which is dominated by tech giants like Dell and Hewlett Packard Enterprise, but Supermicro carved out a niche with its liquid-cooled artificial intelligence (AI) servers.
Image source: Getty Images.
Supermicro's early-mover's advantage in the AI server market, which was reinforced by its tight relationship with Nvidia, turned it into one of the market's hottest AI stocks. Its revenue rose 46% in fiscal 2022 (which ended in June 2022), 37% in fiscal 2023, and 110% in fiscal 2024. Its stock hit a pre-split record high of $1,188.07 on March 13, 2024.
With its stock trading above $1,000, it seemed like the perfect time to split its stock to attract more attention from the media and smaller retail investors. But by the time it finally announced its 10-for-1 split on Aug. 6, 2024, its stock had dropped to $616.94 a share. It sank another 33% before the split was executed two months later.
NASDAQ: SMCI
Key Data Points
Supermicro's troubles started last August when a prolific short-seller accused Supermicro of inflating its revenue. The company initially denied those allegations, but it delayed its 10-K filing for fiscal 2024 to assess its "internal controls over financial reporting."
In October, Supermicro's auditor Ernst & Young resigned and said it was "unwilling to be associated" with financial statements from Supermicro's management. In November, Nasdaq warned Supermicro of a potential delisting if the company didn't file its 10-K in a timely manner, while the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) subpoenaed its financial documents. All of those setbacks caused its stock to tumble to a one-and-a-half-year low of $18.01 on Nov. 14.
Is Supermicro back on the right track?
Supermicro seemed to be on the ropes in late 2024, but its stock has more than doubled since then as it overcame those challenges. The company hired a new auditor and dodged a delisting by filing its overdue 10-K this February. The SEC and DOJ also haven't launched any formal probes or lawsuits against the company.
For fiscal 2025, the company expects revenue to surge 74% to 101% as the AI boom continues. That's far above analysts' expectations for 60% growth. Analysts expect its adjusted earnings per share (EPS) to rise 17%. For fiscal 2026, they expect its revenue and adjusted EPS to grow 39% and 40%, respectively. Those are robust growth rates for a stock which trades at just 10 times forward earnings.
However, the Trump administration's unpredictable tariffs, tighter export curbs on AI chips and servers, and AI server competition are all squeezing its valuations.
Will Supermicro split its stock again in the near future?
So while Supermicro's stock might double or even triple over the next two years if the company weathers those headwinds, matches or exceeds analysts' estimates, and commands a higher valuation, it probably won't soar high enough to justify another stock split.
Yet long-term investors shouldn't care whether Supermicro splits. After all, a stock split merely carves a single share into smaller pieces instead of making them fundamentally cheaper. the stock's trading price will be reduced, but its market cap, price-to-earnings ratio, and other key valuation metrics will remain the same. With the widespread availability of commission-free fractional trades, it really doesn't matter if a stock is trading at $10 or $1,000.
A stock split would only really affect options traders who would find it easier to trade Supermicro's options since a single contract is tethered to 100 shares, and its own employees rely on options-based compensation plans.
So unless you're an active options trader or work for Supermicro, you should simply focus on these three facts: It's carved out a high-growth niche in the AI server market; it's growing rapidly; and it looks undervalued. If you trust the company's management and believe it's sorted out its previous accounting and regulatory issues, it might be a good time to buy its stock.
