TLDR
- Analysts expect Q3 adjusted EPS of $0.62 on revenue of $12.4 billion, up from $0.31 EPS and $4.6B revenue a year ago.
- SMCI stock is down 5.6% this year and has fallen 77% from its March 2024 all-time high of $118.81.
- A March DOJ indictment charged co-founder “Wally” Liaw with illegally exporting AI servers to China, sending the stock down 33%.
- The stock dropped 8.3% on April 23 after a report claimed Super Micro lost an Oracle contract.
- Wall Street average price target sits at $33.20, with 18 analysts rating it a hold.
Super Micro Computer (SMCI) reports fiscal third-quarter earnings after the bell on Tuesday, and investors want answers to a lot more than just the numbers.
Super Micro Computer, Inc., SMCI
The stock was trading at $27.65 on Tuesday, down about 1% on the day. It has fallen 5.6% this year.
Analysts surveyed by FactSet expect adjusted earnings of $0.62 per share on revenue of $12.4 billion. That compares to $0.31 per share on $4.6 billion in revenue in the same quarter last year — a year-over-year revenue jump of roughly 169%.
But it would also mark a sequential step back from last quarter’s $12.7 billion in revenue and $0.69 in earnings, which itself beat expectations by 41%.
The numbers tell one story. The headlines tell another.
The Legal Cloud Hanging Over SMCI
In March, the Department of Justice indicted three individuals, including company co-founder Yih-Shyan “Wally” Liaw, for allegedly conspiring to smuggle U.S.-assembled AI servers to China in violation of export controls. Super Micro was not named as a defendant and says it is cooperating. Liaw has since resigned from the board.
The stock fell 33% the day after the indictment.
Super Micro has launched its own internal investigation, but investors are waiting for management to say something concrete about where things stand. Any update on the probe will be closely watched.
Then came the Oracle hit. On April 23, research firm Bluefin reported that Super Micro had lost a key contract with Oracle. The stock dropped 8.3% that day. Super Micro declined to comment.
Analysts at BofA warned that suppliers — including Nvidia — could restrict GPU allocations to Super Micro, and that customers may be quietly shifting orders to competitors like Dell and HPE.
Margin Pressure Adds to the Concern
Gross margins have compressed to around 8%, down from above 18% in fiscal 2023. Investors want to see whether margins can stabilize, or whether legal and compliance costs push them lower still.
Wall Street has turned cautious. Eighteen analysts rate SMCI a hold on average. The mean price target is $33.20 — which implies roughly 19% upside from current levels, but is well below the targets above $50 that were common earlier this year.
Northland recently downgraded the stock, with analysts saying recent management changes look “reactionary rather than proactive.” Rosenblatt’s Kevin Cassidy said controlling alleged rogue employee behavior is “not” among the company’s strengths.
SMCI stock hit an all-time closing high of $118.81 on March 13, 2024. It has lost 77% of its value since that peak.
On the product side, Super Micro has expanded its Silicon Valley footprint and launched new Arm-based server platforms. EPS estimates have ticked up 0.3% over the past 60 days but have been flat over the past week.
Earnings are due after the market close on Tuesday.
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