Super Micro faces mounting questions as negative news builds: Wedbush

Super Micro Computer (NASDAQ:SMCI) faces mounting questions as to the future of the company, including if it can avoid becoming delisted from NASDAQ in the coming weeks, according to Wedbush.

“With SMCI lacking an auditor and given the negative cloud created by EY’s decision to resign as SMCI’s auditor citing an inability ‘to rely on management’s and the Audit Committee’s representations’ leaving EY ‘unwilling to be associated with the financial statements prepared by management,’ it arguably appears to be an uphill battle for SMCI to remain listed at this point,” said Wedbush analysts Matt Bryson and Antoine Legault, in a Monday investor note.

Wedbush slashed its price target on the stock to $32 from $62, but retained its Neutral rating. Super Micro has cascaded nearly 70% over the past six months. It was up 5% during Monday morning market action.

Wedbush also wants to know if there is a significant problem with financials related to management behavior. In an October 24 filing with the U.S. Securities and Exchange Commission, Super Micro indicated it does not expect any “reinstatements of its quarterly report for the fiscal year 2024.” This suggests there are no problems with financials, but signs appear to be mounting that larger problems possibly exist.

Finally, amid this turmoil, can Super Micro maintain its current sales outlook?

“Before this latest set of issues surfaced, we had encountered some signs SMCI liquid cooling requirements were not as robust as the company might have previously anticipated, suggesting perhaps CY’2H sales of liquid cooled servers aren’t as robust as SMCI might have anticipated,” Bryson added.

Indeed, a report emerged today that Nvidia (NVDA), a primary customer of Super Micro, is rerouting orders previously placed with Super Micro Computer to other suppliers, to contain the disruption within the AI server industry.

Super Micro plans to release a business tomorrow on the first quarter of fiscal 2025, but not a full financial report. The update will be webcast at 5 p.m. ET on Tuesday, November 5.