Recently red hot Super microcomputer (NASDAQ: SMCI) The stock price – up 765% in the past 52 weeks – turned icy on Friday, falling 17.2% through 11:20 a.m. ET. And believe it or not, Wells Fargo is to blame.
This morning, the bank reiterated its equalweight (i.e., hold) rating on the popular artificial intelligence (AI) stock, saying it thinks the shares are worth $960. Considering the stock closed Thursday night at $928, that doesn’t sound too bad… except for one thing.
There’s one bad thing about Supermicro stock
Super Micro Computer announced this morning that it will report its fiscal third quarter 2024 earnings results on Tuesday, April 30. Now, here’s the thing: Seven of the last eight times Super Micro has announced an upcoming earnings report, Wells Fargo says, the company combined this news with a pre-announcement of better-than-expected earnings.
That didn’t happen this time.
All Supermicro said is that the earnings would be released, not that they would be good earnings. And according to Wells, this “should be viewed as a negative, important AI data point.”
How scared should investors be?
There is no reason to panic. As Wells Fargo noted in its note on StreetInsider this morning, the only time (out of the last eight times) that Supermicro worded an earnings announcement this way, Supermicro announced at least “in-line” earnings, which actually matched the previous expectations. Assuming the same holds true this time, that likely means investors can rest assured that third-quarter revenue will still be within the $3.7 billion to $4.1 billion range that management previously promised, and that earnings will still fall somewhere between $4.79 and $5.64 per share.
But considering that most analysts expect Supermicro to post earnings of $5.84 per share this quarter, it increases the risk that the company will at least miss the analysts’ earnings mark. And that alone could be enough to hurt the stock.
That’s the risk you take when you invest in a stock that costs 72 times earnings.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Super Micro Computer Stock Just Crashed 17% was originally published by The Motley Fool
