On Tuesday, Wells Fargo adjusted its financial outlook for Super Micro Computer (NASDAQ:SMCI), reducing the price target to $375 from $650, while maintaining an Equal Weight rating on the company's shares. The revision was prompted by a report issued by Hindenburg Research the day before, which brought attention to Super Micro's historical accounting challenges, specifically regarding revenue recognition practices.
These issues had previously led to a postponement in filing the company's 2017 10-K, an eventual de-listing from Nasdaq in 2018, and the publication of restated financials in May 2019. In August 2020, the company reached a settlement with the SEC, incurring a $17.5 million penalty.
Additionally, CEO Charles Liang was mandated to return $2.1 million in stock profits to Super Micro, without facing any charges of misconduct. Howard Hideshima, the company's former CFO, was required to pay over $300,000 in disgorgement and prejudgment interest, along with a $50,000 penalty, without admitting or denying the findings, and subsequently left the company.
Wells Fargo analysts had a conversation with Super Micro's CFO, David Weigand, and noted several key points. Firstly, while the concerns are centered on internal controls, which could be broadly interpreted, no specific updates to the fourth quarter or full-year 2024 results, nor forward guidance, have been provided by the company.
Secondly, Super Micro highlighted its completion of fiscal year 2024 with a 110% year-over-year growth and provided a robust forecast for fiscal year 2025, anticipating over 70% year-over-year growth with revenues expected to be between $26 billion and $30 billion.
The decision to lower the price target to $375 reflects these uncertainties, particularly concerning revenue recognition, and Super Micro's history with such issues. The new target is now based on a 9 to 10 times price-to-earnings ratio on the firm's calendar year 2025 earnings per share estimate.
In other recent news, Super Micro Computer Inc. has delayed its annual report filing due to the need for additional time to assess internal controls over its financial reporting. This follows allegations of accounting manipulation by Hindenburg Research, leading to a significant drop in the company's shares.
Despite these challenges, Super Micro reported a record-breaking fiscal year with revenues reaching $5.31 billion in the fourth quarter of 2024, marking a 143% year-over-year growth. The full-year revenue for fiscal 2024 stood at $14.94 billion, a 110% increase from the previous year, largely attributed to the company's dominance in the AI infrastructure space.
In addition to these financial results, Super Micro has also announced a 10-for-1 forward stock split and ambitious targets for its direct liquid cooling solutions in data centers. The company projects its Q1 2025 revenue to be between $6 billion and $7 billion, with fiscal 2025 revenue estimated between $26 billion and $30 billion.
In a recent development, Super Micro has added Susie Giordano to its board of directors, bringing over 25 years of experience in advising on strategy, litigation, and compliance.
InvestingPro Insights
Super Micro Computer's (NASDAQ:SMCI) recent financial performance and market trends can be further illuminated by insights from InvestingPro. Analysts are optimistic about the company's sales growth in the current year, which aligns with Super Micro's own robust forecast for fiscal year 2025. Additionally, the sentiment is bolstered by six analysts who have revised their earnings estimates upwards for the upcoming period, reflecting confidence in the company's near-term financial prospects.
InvestingPro Data shows that Super Micro Computer has a market capitalization of $23.28 billion, with a P/E ratio of 18.59, suggesting that the stock is trading at a low price relative to near-term earnings growth. This is particularly relevant given the 110% year-over-year growth completed in fiscal year 2024 and the anticipated over 70% year-over-year growth for fiscal year 2025. Moreover, the company's gross profit margin stands at 14.13%, which indicates room for improvement when compared to industry peers.
Despite a challenging period reflected in the recent stock price decline, with a -12.21% one-week total return, the company has demonstrated a high return over the last year, with a 114.63% one-year price total return. This resilience is a testament to Super Micro's standing as a prominent player in the Technology Hardware, Storage & Peripherals industry. For investors looking for more detailed analysis and additional InvestingPro Tips, there are 17 more listed on InvestingPro's platform for Super Micro Computer.
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