On Wednesday, Goldman Sachs revised its price target on Super Micro Computer (NASDAQ: NASDAQ:SMCI) shares to $28.00 from $67.50, while maintaining a Neutral rating. The adjustment follows Super Micro's preliminary results for the first quarter of fiscal year 2025 and its second-quarter forecast, which both fell short of expectations due to lower-than-anticipated revenue. The company also refrained from reiterating its full-year revenue guidance, signaling possible business challenges ahead.
Super Micro reported preliminary revenues between $5.9 and $6.0 billion, missing Goldman Sachs and consensus estimates of $6.5 billion and $6.4 billion respectively. The shortfall was attributed to delayed shipments related to Blackwell. Despite these challenges, Super Micro confirmed that its Nvidia (NASDAQ:NVDA) GPU allocation remains unchanged. The company's revenue outlook for the second quarter of fiscal year 2025 is projected to be between $5.5 and $6.1 billion, which is below the consensus estimate of $6.8 billion.
The company did outperform in terms of gross margins, achieving 13.3%, which is higher than the 12.3% and 12.0% expected by Goldman Sachs and consensus. This success was credited to a favorable mix of products and customers, along with manufacturing efficiencies. However, Super Micro anticipates a decrease in gross margins by approximately 100 basis points quarter-over-quarter to around 12.3% in the second quarter, with operating expenses expected to increase by $34 million.
Goldman Sachs also noted that Super Micro has provided limited additional information regarding the timing of its 10-K filing but has expressed its intention to file an extension with Nasdaq to regain compliance with listing requirements. In light of the revenue miss and uncertain outlook, Goldman Sachs has lowered its earnings per share (EPS) estimates for fiscal years 2025, 2026, and 2027 by an average of 22%. The firm also reduced Super Micro's target multiple to 8X from 15X, which is below the peer average of 10X, reflecting the heightened risks and uncertainty surrounding the company's growth projections.
In other recent news, Super Micro Computer disclosed its preliminary financial results for Q1 of fiscal year 2025, which ended on September 30, 2024. The company anticipates net sales to range between $5.9 billion and $6.0 billion, falling short of its earlier forecast. Super Micro's non-GAAP diluted net income per common share is expected to be between $0.75 and $0.76. The company's non-GAAP financial measures for the quarter include adjustments for stock-based compensation expenses totaling $50 million.
Super Micro also provided an update regarding the investigation by an independent Special Committee, which found no evidence of fraud or misconduct by management or the Board of Directors. Amidst these developments, Argus downgraded Super Micro's shares from Buy to Hold, following the loss of its key accounting partner, Ernst & Young LLP (EY). Mizuho (NYSE:MFG) maintained a neutral rating on Super Micro shares, citing concerns about the company's internal financial controls and potential delisting from NASDAQ.
Simultaneously, 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. The investigation was triggered by concerns raised by Michael McCaul, chair of the House Foreign Affairs Committee, who suggested that SMIC may be illegally producing chips for Huawei.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Super Micro Computer's current situation. The company's market capitalization stands at $16.22 billion, with a P/E ratio of 12.41, indicating that the stock might be undervalued relative to its earnings. This aligns with an InvestingPro Tip suggesting that SMCI is trading at a low P/E ratio relative to its near-term earnings growth.
Despite the recent challenges highlighted in the article, SMCI has shown impressive revenue growth. InvestingPro data reveals a revenue growth of 109.77% over the last twelve months, with quarterly revenue growth reaching 142.95% in Q4 2024. This robust growth supports another InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
However, investors should note that the stock has experienced significant volatility recently. InvestingPro data shows a 16.24% decline in the past week and a 32.82% drop over the last month. This aligns with the InvestingPro Tip that the stock has taken a big hit over the last week and has fared poorly over the last month.
For those seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for SMCI, providing a deeper understanding of the company's financial health and market position.
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