Is Super Micro a big oversold Buy or is relative strength about to capitulate further?
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Shares of Super Micro Computer (NASDAQ:SMCI) are under pressure again Thursday, with a close below $20 for the first time since May 2023 possible.
The stock is down 10% premarket to around $18.30.
SMCI’s relative strength index reading currently sits at 25.45, below the 30 handle that traditionally signals that an instrument is considered oversold. And today’s selling will likely push the indicator lower.
The RSI is coming off a drop below 20 – extremely oversold territory – at the beginning of this month when Ernst & Young quit as SMCI’s auditors.
It was also below 20 in late August when the stock was slammed by a Hindenburg short report and a delayed 10-K filing.
The RSI rebounded from August’s dive below 20 and had been rebounding from the November dive (see chart below). But with the stock losing all its AI rally gains, a similar rebound to August looks less likely.
From a more bullish perspective, though, Seeking Alpha analyst KM Capital stated that SMCI offers investors a “strong buying opportunity” as the analyst added that the stock is “significantly undervalued.”
KM Capital went on to add: “Despite reputational challenges, SMCI’s partnerships with NVIDIA and AMD affirm its credibility and operational integrity, bolstering confidence in its financial reports… Valuation analysis suggests a fair share price of $90, highlighting substantial upside potential from current levels, making SMCI a compelling opportunity.”
For investors interested in SMCI but perhaps are not completely sold, they can always turn towards exchange traded funds for a more diversified approach. Currently, SMCI is held by 214 ETFs with the three funds that have the largest allocation towards the company listed below: