Super Micro Computer, Inc. (NASDAQ: SMCI) stock has seen a significant decline as investors have turned bearish on the company following recent accounting issues.
In summary, SMCI came under intense scrutiny following the resignation of its auditor, Ernst & Young, citing concerns about governance, transparency, internal control issues, and management independence.
As a result, the stock price wiped out the gains from the company’s venture into artificial intelligence (AI). At the end of the last trading session, SMCI was valued at $26.05, down more than 10% on the day. The stock has fallen 45% in the past week. Since the beginning of the year, SMCI has fallen 8.7%.
From a technical perspective, SMCI stock is showing troubling signs on its 5-year weekly chart, suggesting difficult times ahead.
According to an analysis shared by a market analyst under the pseudonym Brett, recent price movements have pushed SMCI below the important 50-week moving average, suggesting a more near-term downward correction.
The stock has risen significantly over the past five years, but appears to be losing momentum. Overall, investor interest in the company has waned following the stock’s failure to consistently break above key support levels.
AI’s take on SMCI recovery path
As SMCI stock appears to be in free fall, all eyes are on the possibility of a recovery amid the accounting debacle. To this end, Finbold turned to OpenAI’s ChatGPT-4o for insights.
According to ChatGPT-4o, several factors can affect recovery. There may be some optimism if management hires new auditors, addresses internal controls and provides financial transparency. Market reaction, institutional interest, near-term selling pressure, and broader market sentiment will also be important.
If these factors align, we expect ChatGPT-4o to recover in early 2025. However, if internal issues are not resolved, the stock price could continue to decline until late 2025.
Analysts buy SMCI stock
Mizuho Securities analyst Vijay Rakesh supports the possibility of a recovery. Despite Ernst & Young’s resignation, the analyst kept his price target at $45 and reiterated his rating on the stock as “hold.”
However, Rakesh noted that the company’s shares are at increased risk of delisting, especially after Nasdaq issued a non-compliance warning to the company.
SMCI’s management now has an opportunity to correct these issues. The company has until Nov. 16 to submit a 10-K report and present a plan to secure a new reliable auditor.
If AI hardware manufacturers do not meet this requirement, they risk deregistration from exchanges. SMCI needs to file a 10-K and return to compliance by late February 2025, but if it meets the compliance set by Nasdaq, it could be a bullish move that increases investor confidence. be.
At the same time, Rosenblatt Securities suspended SMCI’s rating and price target. Analysts are awaiting clarity on the company’s troubled financial reporting and management practices.
Notably, SMCI’s troubles began in August when Hindenburg Research accused the company of “accounting manipulation,” leading to a short-term stock price correction.
Impact on SMCI earnings reporting
A potential recovery in the stock price will also largely depend on the company’s next earnings report, scheduled for November 5th. If the company beats analyst expectations and issues strong guidance, that could be a positive signal before it fully resolves its accounting issues.
For the first quarter of 2025, SMCI is expected to post earnings of $0.75 per share, representing year-over-year growth of 120.6%. Meanwhile, sales are expected to increase 207.5% year-on-year to $6.52 billion.
In summary, with SMCI showing weakness, investors may want to remain cautious and monitor how technology companies resolve their accounting issues.
