On Wednesday, Mizuho (NYSE:MFG) announced the suspension of its rating and stock price target for Super Micro Computer (NASDAQ:SMCI), citing the absence of comprehensive financial statements and audit results.
The firm's decision comes amid Super Micro's significant year-over-year revenue growth as an AI industry leader, especially with its involvement in NVDA Blackwell. However, the near-term outlook is clouded by uncertainties regarding NASDAQ's pending approval on November 16 and the awaited audited 10-K filing.
Super Micro Computer recently provided an update on its September quarter (SepQ) and guidance for the December quarter (DecQ). The company reported a weaker SepQ and a softer DecQ outlook, with revenue expected to be around $5.80 billion, falling short of the consensus estimate of $6.79 billion. Furthermore, Super Micro has withdrawn its fiscal year 2025 (ending in June) revenue forecast of $28 billion, offering only preliminary figures without detailed financial statements.
The company anticipates appointing an auditor and presenting a compliance plan to NASDAQ by November 16, which is ten days from the announcement date. Despite this step forward, the firm acknowledges potential challenges and a degree of skepticism in the market. Moreover, a special committee's forensic accounting investigation found no evidence of fraud within Super Micro Computer's operations.
Despite the positive gross margins (GMs) reported for the September quarter, the forecast for the December quarter suggests a decline of approximately 100 basis points quarter-over-quarter, bringing the expected GM down to 12.3%. This anticipated decrease adds another layer of uncertainty to Super Micro's near-term financial outlook.
In other recent news, Super Micro Computer's preliminary financial results for the first quarter of fiscal year 2025 did not meet revenue expectations, which was attributed to delayed customer orders. Despite this, the company's gross margins exceeded projections.
Super Micro's management confirmed that they are actively seeking a new public accounting firm following the resignation of their previous auditor, Ernst & Young. An internal investigation revealed no evidence of fraud within the management team or the Board of Directors.
Amid these developments, Super Micro's shares were downgraded from Buy to Hold by Argus, and both Barclays (LON:BARC) and Goldman Sachs revised their price targets due to the company's ability to meet Nasdaq's listing requirements and lower-than-expected revenue. The company's revenue outlook for the second quarter of fiscal year 2025 is projected to be between $5.5 and $6.1 billion.
In conjunction with these updates, China's Semiconductor Manufacturing International Corp (SMIC) and Huawei are under investigation by the U.S. Commerce Department for potential violations of U.S. export control laws. These investigations were initiated by concerns raised by Michael McCaul, chair of the House Foreign Affairs Committee. These are recent developments regarding Super Micro Computer and SMIC.
InvestingPro Insights
Super Micro Computer's recent financial uncertainties are reflected in its market performance and valuation metrics. According to InvestingPro data, SMCI's stock has experienced significant volatility, with a 32.82% decline in the past month and a substantial 66.64% drop over the last six months. This aligns with the company's current challenges regarding financial reporting and NASDAQ compliance.
Despite these setbacks, InvestingPro Tips highlight that analysts anticipate sales growth in the current year, and the company remains profitable with a P/E ratio of 12.41. This suggests that market participants still see potential in SMCI's business model, particularly given its role in the AI industry.
The company's financial health shows mixed signals. While SMCI operates with a moderate level of debt and its liquid assets exceed short-term obligations, it's also quickly burning through cash. This could be a concern given the current uncertainties surrounding its financial statements.
For investors seeking a more comprehensive analysis, InvestingPro offers 19 additional tips for Super Micro Computer, providing a deeper understanding of the company's financial position and market outlook.
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