Super Micro's New Auditor: A Cautious Optimism for Investors
Friday, Nov 29, 2024 7:02 am ET
3min read Super Micro Computer (SMCI) has been a rollercoaster ride for investors, with its stock swinging from a hot AI play to a risky investment facing potential delisting. Now, the tech company has appointed BDO as its new auditor, sparking hope among investors. But is it safe to buy the stock now?
Super Micro's annual report, due on August 29, remains outstanding, with the company still working to file its audited financials. However, the appointment of BDO and the submission of a compliance plan to Nasdaq have provided a temporary reprieve, preventing the stock from being delisted.
BDO, a respected accounting firm with global capabilities, brings a fresh perspective to Super Micro's financials. The company's previous auditor, Ernst & Young, resigned over concerns regarding internal controls. BDO's clean slate approach will allow for a thorough review of Super Micro's financials, helping to restore investor confidence.
Super Micro also released preliminary Q1 results, showing growth in net sales and improvement in gross profit margins. However, investors should remain cautious, as these numbers come amidst lingering concerns about the company's controls and processes.
The server hardware business has thin margins, leaving little room for error in revenue recognition. If Super Micro has to adjust its processes and controls, it could impact its bottom line and valuation. While the stock may appear cheap now, trading at just 11 times next year's earnings, any restatement of financials could significantly alter its appearance and make it an expensive investment.
The company's new compliance plan submitted to Nasdaq aims to address previous non-compliance issues and prevent future delisting risks. By filing the overdue annual report and quarterly report within the allowed time frame, Super Micro hopes to regain compliance and avoid delisting.
In conclusion, Super Micro's new auditor brings hope to investors, but caution is still warranted. While BDO's appointment addresses immediate concerns, the ultimate outcome of their audit will determine the company's future. Investors should monitor the situation closely and remain prepared for potential adjustments to the company's financials.
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