CFRA has downgraded shares of Super Micro Computer (NASDAQ: NASDAQ:SMCI) from Buy to Hold, significantly lowering the price target to $454 from the previous $729. The decision comes in the wake of allegations made by Hindenburg Research regarding accounting manipulation and other serious issues within the company.
The new price target is based on a P/E ratio of 15 times the CY 25 earnings per share (EPS) projection of $30.25, which is higher than the company's three-year average.
The downgrade follows the release of a report by Hindenburg Research that accused Super Micro Computer of accounting manipulation, export control failures, and customer issues. CFRA notes that while the evidence does not conclusively prove significant accounting malpractice or sanction evasions, the delayed filing of SMCI's 10-K and potential damage to the company's reputation are concerning. These factors have led to a more cautious stance by CFRA.
Despite the downgrade, CFRA maintains its FY 25 EPS estimate for Super Micro Computer at $32.82 and FY 26's estimate at $44.34. The firm acknowledges the company's leadership in liquid cooling technology and its growth prospects, particularly with the anticipated launch of the Blackwell product and increasing AI workloads. However, the recent allegations and the risk of losing customers have prompted CFRA to adjust its outlook.
CFRA also referenced Super Micro Computer's history, noting that the company had faced similar issues back in 2018, which heightens current concerns. While CFRA continues to see positive secular trends for SMCI, the firm has chosen to take a more conservative approach due to the uncertainties and potential risks highlighted by the allegations.
In other recent news, Super Micro Computer has lowered its stock target for Super Micro, prompted by a report from Hindenburg Research that highlighted historical accounting challenges, specifically concerning revenue recognition practices.
Despite these challenges, Super Micro has reported a record-breaking fiscal year with revenues of $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.
Super Micro has also announced a delay in its annual report filing, citing a need for additional time to assess internal controls over its financial reporting. This decision follows allegations of accounting manipulation by Hindenburg Research. Furthermore, the company has added Susie Giordano to its board of directors, bringing over 25 years of experience in advising on strategy, litigation, and compliance.
In their conversation with Super Micro's CFO, David Weigand, Wells Fargo (NYSE:WFC) analysts noted that while concerns are centered on internal controls, no specific updates to the fourth quarter or full-year 2024 results, nor forward guidance, have been provided by the company. However, Super Micro has forecasted a revenue of between $26 billion and $30 billion for fiscal year 2025, anticipating over 70% year-over-year growth.
InvestingPro Insights
Amid the recent challenges faced by Super Micro Computer (NASDAQ:SMCI), real-time data and analysis from InvestingPro offer additional context for investors. The company's market cap stands robust at $24.64 billion, reflecting significant investor confidence. Moreover, Super Micro Computer's impressive revenue growth over the last twelve months, at 109.77%, signals strong business expansion, which may reassure investors about the company's underlying performance. Despite the allegations and the resulting volatility, the stock's P/E ratio of 18.59 remains attractive, especially when considering the near-term earnings growth prospects.
InvestingPro Tips also provide valuable insights. Analysts anticipate sales growth in the current year, which could indicate resilience in the face of recent allegations. Furthermore, 6 analysts have revised their earnings upwards for the upcoming period, suggesting that the company's financial outlook may be brighter than the current sentiment reflects. For investors seeking more detailed analysis, there are over 17 additional InvestingPro Tips available, offering a comprehensive view of Super Micro Computer's financial health and market position.
While the short-term price performance has seen declines, with a 1-week price total return of -12.21%, the long-term view remains strong, with a 1-year price total return of 114.63%. This contrast highlights the stock's volatility but also its potential for high returns. As the market digests the allegations and Super Micro Computer's response, these InvestingPro metrics and tips can help investors navigate the uncertainty.
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