Key Takeaways
- Wall Street forecasts Q3 adjusted EPS of $0.62 on $12.4 billion revenue, compared to $0.31 EPS and $4.6B revenue in the prior-year quarter.
- SMCI shares have declined 5.6% year-to-date and plummeted 77% from the March 2024 record high of $118.81.
- DOJ indicted co-founder “Wally” Liaw in March for allegedly smuggling AI servers to China illegally, triggering a 33% stock plunge.
- Shares fell 8.3% on April 23 following reports that the company lost a significant Oracle partnership.
- The consensus analyst price target stands at $33.20, with 18 analysts assigning a hold rating.
Super Micro Computer (SMCI) unveils its fiscal third-quarter financial results after market hours on Tuesday, with shareholders seeking clarity on multiple pressing issues beyond standard financial metrics.
Super Micro Computer, Inc., SMCI
Shares were changing hands at $27.65 during Tuesday’s session, sliding roughly 1% intraday. The stock has lost 5.6% since the beginning of the year.
Street consensus from FactSet anticipates adjusted profit of $0.62 per share on $12.4 billion in sales. This represents substantial growth from the year-ago period’s $0.31 per share and $4.6 billion revenue ā translating to approximately 169% year-over-year revenue growth.
However, these figures would represent a sequential decline from the previous quarter’s $12.7 billion revenue and $0.69 earnings, which exceeded forecasts by 41%.
The financial data presents one narrative. The news headlines present quite another.
Legal Complications Cast Shadow Over SMCI
The Department of Justice filed charges in March against three people, including company co-founder Yih-Shyan “Wally” Liaw, alleging a conspiracy to illegally export U.S.-manufactured AI servers to China, violating export restrictions. While Super Micro wasn’t charged as a defendant and states it’s cooperating fully, Liaw subsequently stepped down from the board.
The stock plummeted 33% following the indictment announcement.
Super Micro initiated its own internal review, though market participants are anticipating management commentary providing substantive details about the situation’s status. Any disclosure regarding the investigation will draw intense scrutiny.
Next came the Oracle development. Research firm Bluefin reported on April 23 that Super Micro had been dropped from a critical Oracle agreement. The stock tumbled 8.3% that session. Super Micro offered no public response.
Bank of America analysts cautioned that vendors ā including Nvidia ā might limit GPU shipments to Super Micro, while customers could be discreetly redirecting purchases toward rivals like Dell and HPE.
Profitability Margins Under Strain
Gross profit margins have contracted to approximately 8%, down sharply from above 18% during fiscal 2023. Market watchers are eager to learn whether margins can find a floor, or if legal and regulatory expenses will drive them even lower.
Analyst sentiment has grown more reserved. Eighteen analysts assign SMCI a hold rating on average. The consensus price objective sits at $33.20 ā suggesting about 19% potential upside from today’s levels, yet significantly below the $50-plus targets that were prevalent earlier this year.
Northland recently cut its rating, with analysts characterizing recent leadership adjustments as “reactionary rather than proactive.” Rosenblatt’s Kevin Cassidy noted that managing alleged unauthorized employee conduct is “not” among the organization’s core competencies.
SMCI stock reached an all-time closing peak of $118.81 on March 13, 2024. The shares have surrendered 77% of their value from that high point.
Regarding product developments, Super Micro has broadened its Silicon Valley operations and introduced new Arm-based server solutions. EPS projections have edged up 0.3% during the past 60 days but remained unchanged over the past week.
The quarterly report arrives after Tuesday’s market close.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
