Super microcomputer (NASDAQ: SMCI) Stocks had another day of big sell-off in Thursday’s trading. The company’s share price ended the daily session down 11%.
Supermicro shares fell afterward today Cisco has made new comments about its plans to enter the artificial intelligence (AI) server market. Today’s valuation drop followed a 6.3% decline in the company’s stock price after a filing with the Securities and Exchange Commission (SEC) revealed that the technology specialist would be unable to meet the filing deadline for its quarterly 10-Q report.
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Supermicro’s share price is now down 62% in the past month and 36.5% year to date. The stock is also down 85% from the lifetime high it reached in March.
After riding high on rising AI-related demand to start 2024, Supermicro has seen a steep valuation decline. Coupled with the stock’s massive sell-off, the strong revenue and earnings growth the company is reporting could make the stock look quite cheap based on many traditional valuation measures.
Trading at less than 6.2 times this year’s expected earnings and less than 42% of expected revenue, Supermicro’s shares could appear undervalued based on the recent momentum for the company. But the company’s situation is simply too complicated to place much value on traditional valuation metrics.
The storm of controversy surrounding the company had its inciting incident in August, when short seller Hindenburg Research published a bearish report on the company, citing repeated accounting violations. The next day, the company announced that it would delay the filing of its annual 10-K report with the SEC to conduct a review of its internal controls over financial accounting. Missing the 10-K filing raised the possibility that the shares would be delisted from the Nasdaq stock exchange.
Then in October, shareholders suffered another blow. Ernst & Young (EY) resigned as the company’s financial auditor. EY said it has decided to step down from this role due to “information that has recently come to our attention which has resulted in us no longer being able to rely on the representations of management and the Audit Committee and our unwillingness to associate to be prepared with the financial statements by management.”
Supermicro still has not filed its 10-Q report and is now on track to miss the deadline for its final 10-Q report. The company is also reportedly under investigation by the Department of Justice. Making matters worse, the company’s competitive position in the high-performance server market appears to be weakening. Reports have appeared about this Nvidia sends graphics processing units (GPUs) that Supermicro was about to receive to other players in space.
