Super Micro Computer Inc The stock price of (NASDAQ:SMCI) plummeted after JP Morgan Analyst Samik Chatterjee downgraded the stock from Overweight to Neutral and lowered his price target from $950 to $500.
While recent filings indicate the company is working diligently to meet regulatory requirements and business is continuing as normal, Chatterjee noted that it is difficult to gain more visibility when the company returns to compliance with its filing requirements.
The analyst pointed to the Hindenburg report and the delay in filing the 10-K as separate events in and of themselves, but expects the lack of visibility into when the company will return to compliance to create challenges for near-term sentiment on results compared to the 2017-2020 time frame and the severity of the impact on financials.
He therefore recommended that new investors stay on the sidelines. The analyst further noted that Super Micro’s follow-up response to ensure unchanged demand could imply further aggressiveness in pricing, and expectations on the timing of margin recovery towards the long-term range will be a point of watch for investors over the next two quarters.
The target price cut reflects a lower earnings multiple, in line with traditional IT hardware companies, which have much lower growth trajectories to account for uncertainty.
The target price reflects Chatterjee’s updated calendar 2026 EPS estimate at a target P/E multiple of 10x (vs. 19x previously), as exposure to strong AI-driven computing demand is offset by over-assessment of internal controls and delayed regulatory filings.
The analyst noted that Super Micro is positioned with a strong product portfolio, including full-rack scale solutions and liquid-cooled systems, and a unique building block approach to product development that enables rapid product upgrades amid the prospect of strong AI-driven computing demand.
Chatterjee projects fiscal first-quarter 2025 revenue of $6.54 billion and earnings per share of $7.48.
Price Action: SMCI shares fell 7.11% to $384.58 at last check on Friday.
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This article Super Micro Struggles With Compliance And Growth Uncertainty: JP Morgan Downgrades Its Stock originally appeared on Benzinga.com
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