Super Micro, a prominent player in the server manufacturing industry, faces a critical moment as it prepares to release its earnings report on Tuesday. The company has experienced a whirlwind 2024, with its stock price undergoing dramatic fluctuations. After reaching new heights upon joining the S&P 500 in March, the stock plummeted by 85% over the subsequent eight months. Recently, however, shares of the server maker have started to climb once again.
The company has seen its revenue more than double for three consecutive quarters, driven by surging demand for artificial intelligence (AI) infrastructure. Super Micro's servers, equipped with Nvidia's graphics processing units, position it competitively alongside industry giants such as Dell and Hewlett Packard Enterprise. Despite this promising narrative in the AI market, the company faces significant challenges, including governance concerns and a Department of Justice investigation.
In September, the Department of Justice reportedly began probing Super Micro, and Ernst & Young resigned as the company's auditor in late October. The firm cited governance issues, financial control concerns, and doubts about the board's independence. Ernst & Young stated:
"We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee's representations," – Ernst & Young
In November, BDO was appointed as Super Micro's new auditor. These developments follow a turbulent period where the stock plummeted 38% in August and continued its downward trajectory, leading to its removal from the Nasdaq 100 in December—merely five months after being added.
Despite these setbacks, Super Micro's shares have rebounded by 59% over the past five trading days, including an 18% surge on Monday. Analysts anticipate a revenue increase of approximately 60% for the December quarter, reaching $5.89 billion according to a consensus from LSEG.
However, there are concerns about the company's future. Only ten analysts currently cover Super Micro's stock, a significant decline from previous numbers. Matt Bryson expressed caution:
"Given our lack of certainty around SCMI's listing status as well as near-term results, and with our more optimistic view around longer term sales opportunities offset by our concerns around increased competition, we believe it is appropriate we retain our neutral rating," – Matt Bryson
Super Micro's central role in the burgeoning AI sector presents a bullish outlook. However, the company has yet to file its audited financials for its last fiscal year or quarter, adding to investor uncertainty. The market eagerly awaits the upcoming earnings report to shed light on Super Micro's financial health and strategic direction.