Analysts Flee Super Micro Amidst Earnings Miss and Auditor Exit
Wednesday, Nov 6, 2024 11:42 am ET
SMCI --
Super Micro Computer Inc. (SMCI) has faced a wave of negative sentiment from Wall Street analysts following its recent quarterly update, with many downgrading or pulling their ratings on the company's stock. The server technology company announced a dismal sales projection and opted not to provide a timeframe for publishing overdue financial statements, leading to shares of SMCI dipping Wednesday. The troubles for Super Micro have grown more severe this year, with a former employee alleging the company exaggerated income and short-seller Hindenburg Research echoing these complaints based on "accounting red flags." The company's auditor, Ernst & Young LLP, also resigned last week, citing concerns about Super Micro's commitment to integrity and ethics.
Super Micro's listing status is now at risk, as it failed to file its annual 10-K report by an August deadline. Nasdaq rules give the company until mid-November to submit a plan to restore it to compliance, and if that plan is approved, it could get extra time, pushing the deadline to February 2025. However, the resignation of Ernst & Young makes this more challenging. Wedbush analyst Matt Bryson believes Super Micro is likely to be delisted due to the timelines involved, as it may struggle to file its 10-K report in just a few months without an auditor.
The company's shares have plummeted over 75% since March, and a Nasdaq delisting could also trigger removal from the S&P 500, leading to forced selling of the shares by institutions. Dell Technologies Inc. could be a potential beneficiary, as analysts feel the recent challenges for Super Micro will benefit the company and HP Enterprise.
Super Micro's delayed 10-K filing and auditor resignation have raised serious concerns about the company's financial reporting and investor confidence. The company's failure to file its annual report on time, combined with the resignation of its auditor, Ernst & Young, has led to speculation about potential accounting irregularities and governance issues. The delayed filing and auditor resignation have prompted analysts to downgrade or suspend their ratings on Super Micro's stock, as seen in the provided articles. The resignation of Ernst & Young, in particular, is considered a red flag in the financial and investment community, as it indicates that the auditor no longer has confidence in the company's financial statements. The lack of investor transparency and inadequate communication from Super Micro have also been cited as concerns by analysts. The company's stock has plummeted following these developments, with investors bailing as issues pile up. The delayed filing and auditor resignation have raised questions about the company's ability to meet Nasdaq's compliance obligations and its potential delisting from the S&P 500.
Analysts and regulators have raised concerns about Super Micro's accounting practices and governance. In August 2024, short-seller Hindenburg Research alleged "accounting manipulation" at the AI-server maker, leading Super Micro to delay its annual report. In October 2024, the company's auditor, Ernst & Young, resigned due to concerns about the company's commitment to integrity and ethics, prompting a special board committee probe. The resignation followed a US Department of Justice probe sparked by Hindenburg's allegations.
Super Micro's recent woes have created opportunities for its competitors, with analysts upgrading shares of Dell Technologies and HP Enterprise. Citi analyst Asiya Merchant believes these companies could seize market share as Super Micro faces challenges. Dell shares dropped 2% in premarket trade, while HP Enterprise gained 3.7%. Merchant noted that lower competition and more AI-related orders could benefit Dell, as well as, to a lesser degree, HP. Super Micro's struggles may lead to increased orders for Nvidia GPUs from other suppliers, such as Gigabyte and ASRock, which have secured contracts with major generative-AI computing supplier Coreweave. Wedbush analysts Matt Bryson and Antoine Legault lowered Super Micro's price target to $32 from $62 on Nov. 4, citing concerns about the company's ability to file its 10K and potential restatements.
Super Micro Computer Inc. (SMCI) faces potential regulatory actions and legal consequences as a result of ongoing investigations and negative analyst sentiment. The U.S. Department of Justice is probing the company's accounting practices, following allegations of manipulation by short-seller Hindenburg Research. Additionally, Super Micro's auditor, Ernst & Young, resigned citing concerns about the company's commitment to integrity and ethics. These developments have led to a significant drop in Super Micro's stock price and a downgrade by analysts. If the investigations uncover evidence of wrongdoing, Super Micro could face penalties, fines, or even criminal charges. Furthermore, the company may be required to restate its financials, which could lead to further reputational damage and potential lawsuits from investors.
Super Micro's listing status is now at risk, as it failed to file its annual 10-K report by an August deadline. Nasdaq rules give the company until mid-November to submit a plan to restore it to compliance, and if that plan is approved, it could get extra time, pushing the deadline to February 2025. However, the resignation of Ernst & Young makes this more challenging. Wedbush analyst Matt Bryson believes Super Micro is likely to be delisted due to the timelines involved, as it may struggle to file its 10-K report in just a few months without an auditor.
The company's shares have plummeted over 75% since March, and a Nasdaq delisting could also trigger removal from the S&P 500, leading to forced selling of the shares by institutions. Dell Technologies Inc. could be a potential beneficiary, as analysts feel the recent challenges for Super Micro will benefit the company and HP Enterprise.
Super Micro's delayed 10-K filing and auditor resignation have raised serious concerns about the company's financial reporting and investor confidence. The company's failure to file its annual report on time, combined with the resignation of its auditor, Ernst & Young, has led to speculation about potential accounting irregularities and governance issues. The delayed filing and auditor resignation have prompted analysts to downgrade or suspend their ratings on Super Micro's stock, as seen in the provided articles. The resignation of Ernst & Young, in particular, is considered a red flag in the financial and investment community, as it indicates that the auditor no longer has confidence in the company's financial statements. The lack of investor transparency and inadequate communication from Super Micro have also been cited as concerns by analysts. The company's stock has plummeted following these developments, with investors bailing as issues pile up. The delayed filing and auditor resignation have raised questions about the company's ability to meet Nasdaq's compliance obligations and its potential delisting from the S&P 500.
Analysts and regulators have raised concerns about Super Micro's accounting practices and governance. In August 2024, short-seller Hindenburg Research alleged "accounting manipulation" at the AI-server maker, leading Super Micro to delay its annual report. In October 2024, the company's auditor, Ernst & Young, resigned due to concerns about the company's commitment to integrity and ethics, prompting a special board committee probe. The resignation followed a US Department of Justice probe sparked by Hindenburg's allegations.
Super Micro's recent woes have created opportunities for its competitors, with analysts upgrading shares of Dell Technologies and HP Enterprise. Citi analyst Asiya Merchant believes these companies could seize market share as Super Micro faces challenges. Dell shares dropped 2% in premarket trade, while HP Enterprise gained 3.7%. Merchant noted that lower competition and more AI-related orders could benefit Dell, as well as, to a lesser degree, HP. Super Micro's struggles may lead to increased orders for Nvidia GPUs from other suppliers, such as Gigabyte and ASRock, which have secured contracts with major generative-AI computing supplier Coreweave. Wedbush analysts Matt Bryson and Antoine Legault lowered Super Micro's price target to $32 from $62 on Nov. 4, citing concerns about the company's ability to file its 10K and potential restatements.
Super Micro Computer Inc. (SMCI) faces potential regulatory actions and legal consequences as a result of ongoing investigations and negative analyst sentiment. The U.S. Department of Justice is probing the company's accounting practices, following allegations of manipulation by short-seller Hindenburg Research. Additionally, Super Micro's auditor, Ernst & Young, resigned citing concerns about the company's commitment to integrity and ethics. These developments have led to a significant drop in Super Micro's stock price and a downgrade by analysts. If the investigations uncover evidence of wrongdoing, Super Micro could face penalties, fines, or even criminal charges. Furthermore, the company may be required to restate its financials, which could lead to further reputational damage and potential lawsuits from investors.