On Wednesday, Barclays downgraded Super Micro Computer (NASDAQ:SMCI), traded on NASDAQ:SMCI stock, from Overweight to Equalweight, significantly reducing the price target to $438 from the previous $693. The adjustment comes amid concerns about the company's future gross margins in the artificial intelligence (AI) server market, its competitive stance, and corporate governance issues.
The firm expressed a more cautious stance due to several factors impacting Super Micro Computer. Among the concerns are the unclear trends in AI server gross margins, ongoing loss of customers, and a weakening competitive position in the GB200 era, which refers to the next generation of server platforms. The analyst also pointed to the need for higher working capital and the potential for improvements in internal controls and corporate governance.
Barclays highlighted the necessity for Super Micro Computer to enhance transparency in financial reporting, specifically regarding quarterly order intake and backlog details. Despite these concerns, the firm remains positive about the long-term prospects of AI technology.
The new price target of $438 is based on a 12 times forward earnings multiple, applied to the fiscal year 2025 estimated earnings per share of $36.48. This valuation approach aligns with the target multiple used for Dell (NYSE:DELL), Super Micro Computer's largest competitor. Barclays has made no changes to its earnings model for Super Micro Computer at this time.
In other recent news, Super Micro Computer Inc. has been in the spotlight due to a series of developments. The company refuted allegations by Hindenburg Research of accounting irregularities, describing the report as containing "false or inaccurate statements." Despite this controversy, Super Micro assured stakeholders of no significant adjustments to its fourth-quarter or fiscal-year financial outcomes.
In response to these allegations, Super Micro postponed the filing of its annual report to reevaluate its internal controls over financial reporting. This delay led to varied responses from analysts. Rosenblatt maintained a Buy rating on Super Micro's shares, while CFRA and Wells Fargo downgraded their ratings due to the allegations.
Super Micro also issued a letter to its customers and partners, which was filed with the Securities and Exchange Commission. The content of the letter remains undisclosed, but it represents the company's commitment to transparency and communication with its stakeholders.
The company previewed its new X14 server platforms built on the upcoming Intel® Xeon® 6900 series processors. These servers aim to maximize performance for compute-intensive workloads. Despite these advancements, Super Micro reported record-breaking fiscal year revenues of $14.94 billion, with fourth-quarter revenues reaching $5.31 billion.
Lastly, Super Micro appointed Susie Giordano to its board of directors and projected a revenue of between $26 billion and $30 billion for fiscal year 2025. These recent developments provide a glimpse into the ongoing activities within Super Micro Computer Inc.
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