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Key Takeaways
- Super Micro Computer shares fell Friday morning as analysts downgraded the stock amid uncertainty over its regulatory filings and concerns about how customers could respond.
- The server maker recently said it was delaying the filing of its annual report with the SEC to ensure its “internal controls over financial reporting” are effective.
- J.P. Morgan analysts said there was “not a clear rationale” for new investors to buy into the stock until the regulatory uncertainty is resolved.
Shares of Super Micro Computer (SMCI) dropped Friday after J.P. Morgan analysts downgraded the server maker’s stock, citing concerns over the company’s delayed annual report.
The analysts downgraded Super Micro’s stock to “neutral” from “overweight” and cut their price target to $500 per share from $950—valuing the stock more similarly to other hardware manufacturers with “lower growth trajectories to account for the uncertainty.”
Super MIcro’s shares were recently down about 6% to near $389 apiece, leaving them up some 35% this year. Wall Street’s mean price target is just above $450, according to Visible Alpha.
Analysts Say Delayed 10-K, Customer Response Could Cause Overhang
Super Micro recently delayed the release of its annual report, saying it needed more time to “complete its assessment of the design and operating effectiveness of its internal controls over financial reporting.”
JP Morgan’s analysts said the delay, which isn’t Super Micro’s first, could have an impact on the behavior of customers who could be looking for better prices from the server maker. They noted the delay could also cause an “overhang,” recommending new investors “remain on the sidelines” until the uncertainty is resolved.
There is “not a clear rationale” for new investors to buy into Super Micro’s stock until the company’s regulatory issues are resolved,” they wrote.
The stock has been under pressure following lackluster earnings. A report in late August from short seller Hindenburg Research accusing the company of “accounting manipulation, sibling self-dealing and sanctions evasion.”
JPMorgan analysts wrote when the report was released that they believed there was “limited evidence” of problems with Super Micro’s accounting, and said other issues raised like not communicating sales properly to investors do “not immediately suggest any wrongdoing.”
UPDATE: This story has been updated to reflect new share-price information and to correct the direction of the shares’ year-to-date move.