Super Micro Computer up 78% this week; What has changed since auditor exit?

Super Micro Computer (NASDAQ:SMCI) jumped over 78% this week after the artificial intelligence server maker appointed BDO USA as its new independent auditor and submitted a compliance plan with the Nasdaq.

Shares of the San Jose, California-based firm slumped 47% in four back-to-back sessions of losses over the end of October and the start of November, after its former auditor, Ernst & Young, resigned, citing concerns over the company’s governance, transparency, and internal control measures.

Having become a component of the S&P 500 index (SP500) in March, today the stock has lost just over $50B in market cap. See here for a timeline of some major events that contributed to that huge decline.

The company earlier this month reported better-than-expected preliminary earnings figures for Q1 fiscal 2025, though its Q2 guidance came in below consensus. Meanwhile, following several SEC disclosures to delay its 10-K filing and seek additional time to select a new auditor, the stock hit a 52-week low on November 15.

Super Micro (NASDAQ:SMCI) has bounced back strongly this week since then, as analysts reacted positively to BDO USA’s appointment as its new auditor.

SA Investing Group Leader JR Research argued that BDO’s appointment “is expected to have a profound near-term uplift for SMCI, potentially lowering the risks of a Nasdaq delisting.” “Although BDO USA is not a part of the Big Four, it’s assessed to have the necessary capabilities to audit Supermicro’s global operations.” JR Research added in Super Micro Computer: Bargain Buying Opportunity Has Finally Arrived (Upgrade).

SA Investing Group Leader Henrik Alex agreed. “While not as large as market leaders Deloitte, EY, PwC, and KPMG, BDO certainly has the capabilities and resources to conduct an expedited audit of the company’s FY2024 financial statements,” Alex wrote in Super Micro Computer: Auditor Increases Odds Of Continued Nasdaq Listing—Hold.

However, with only a ~17% gain this year, Super Micro (NASDAQ:SMCI) continues to underperform its bigger competitors, Dell Technologies (DELL) and Hewlett Packard (HPE).

According to SA analyst Hataf Capital, the stock offers “a compelling risk-reward opportunity.” “There is room for further upside if the company successfully addresses its regulatory challenges and continues executing on its growth strategy,” Hataf Capital wrote in Super Micro Computer: A Calculated Risk Worth Taking.