(Bloomberg) — The rollercoaster ride for Super Micro Computer Inc. stock is likely to continue for some time as investors weigh the company’s next steps to avoid being delisted by Nasdaq Inc. is deleted.
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The server maker rose nearly 60% this week after it hired BDO USA as an independent auditor and filed a plan to comply with Nasdaq listing requirements. It’s the latest twist in a saga that has seen the once-popular stocks hit record highs in March before those gains evaporated amid allegations of accounting and governance issues and filing delays.
The company said this week that it believes it can file its delayed 10-K and 10-Q reports in the time period available under Nasdaq rules. If Super Micro’s proposal is accepted, it will likely take until mid-February for the application to be submitted. That creates months of further uncertainty, leaving investors to decide whether to stick with the stocks in hopes of a recovery or conduct a bailout.
“I really think it’s just a total coin toss at this point,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily. Tentarelli said he previously owned shares of Super Micro, but sold in late July when the shares were around $80.
Representatives for Super Micro and Nasdaq did not immediately respond to Bloomberg News requests for comment.
The San Jose, California-based company delayed filing its annual 10-K after a damaging report earlier this year from short-seller Hindenburg Research, and has said it would be late with quarterly reports.
The company’s previous auditor, Ernst & Young LLP, resigned in October over concerns about the company’s transparency and governance. Super Micro is also facing a U.S. Department of Justice investigation.
Bloomberg Intelligence analyst Woo Jin Ho reserves judgment on whether Super Micro can recover.
“The filing extension gives the company until the end of February to submit the documents, but it appears that the delisting will likely continue until it becomes compliant,” he wrote. “Given the challenges Ernst and Young have noted in working with Super Micro’s board, it is unclear whether BDO will face similar issues.”
Nasdaq must now review and approve the company’s plan, a process expected to take about two weeks. If the exchange does not accept the proposal, Super Micro can appeal the decision. The shares will remain listed for the time being.
Others on Wall Street are more optimistic, saying Super Micro is too important to be delisted and removed from the S&P 500 Index. The company was included in the benchmark in March, further leveraging its staggering returns to that point.
With the possibility of a delisting now reduced, “we expect the stock to be close to our price target in the near term,” says Lynx Equity Strategies analyst KC Rajkumar, who puts a price target of $45, which is a implies an increase of more than 50%. closed from Thursday.
Still, several other analysts are reluctant to make the call, as at least seven companies have suspended coverage of the stock since late October, when previous auditor Ernst & Young LLP resigned, according to data compiled by Bloomberg.
As they weigh Super Micro’s prospects, investors are also keeping their eyes on the competition. The company’s troubles could be a potential boon for rival server makers including Dell Technologies Inc., Lenovo Group Ltd., according to Bloomberg Intelligence. Wiwynn Corp., Hon Hai Precision Industry Co. and Pegatron Corp. Dell shares rose in November while Super Micro collapsed.
On the other hand, with the possibility of a Super Micro delisting now remote, hardware peers such as Dell “could be in danger of seeing the stock disappear,” wrote Lynx analyst Rajkumar.
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