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Super Micro Computer (NASDAQ:SMCI) is a name that has done plenty of headline-hogging over the past year.
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From being an AI darling at the start of 2024, piling on gains, shares of the AI server maker plummeted due to alarming corporate governance issues. Short-seller Hindenburg Research alleged accounting irregularities, SMCI delayed its FY24 financial results – risking Nasdaq delisting – and Ernst & Young resigned as auditor over financial accuracy concerns. However, the stock has bounced off its lows following some positive developments: an internal probe found no fraud, BDO was appointed as the new auditor, and Nasdaq granted an extension until February 25 to regain compliance.
Now, with the company set to provide its second-quarter fiscal 2025 business update tomorrow after the close (February 11), could the transformation from AI winner to pariah come full circle, allowing SMCI to once again take the AI opportunity by the horns?
One top investor, known as KM Capital, certainly thinks so, seeing this event as a “significant game-changing catalyst.”
“This announcement significantly increases the likelihood that the company will meet its FY2024 10-K filing deadline as agreed with Nasdaq, thereby greatly reducing delisting risks,” said KM Capital. “The company is extremely unlikely to select such an important event date without being sure they can complete the necessary filings soon after.”
Recall, this is not the first time SMCI is facing such a situation. The company was temporarily delisted in 2018 due to its failure to file financial reports on time. But KM Capital says the company’s past success in “overcoming similar obstacles” and getting listed again “strengthens the optimistic outlook for its ability to resolve current regulatory issues.”
Once that is out of the way, SMCI can focus on maximizing the AI opportunity. The company is actively expanding its presence in the growing AI market, with R&D spending surging in recent years. SMCI recently ramped up full production of Nvidia Blackwell solutions, with CEO Charles Liang emphasizing their partnership in advancing AI infrastructure.
“This development showcases SMCI’s commitment to providing cutting-edge AI infrastructure solutions,” says KM Capital.
Meanwhile, given the shares’ retreat from the highs of early last year, KM thinks that for a company capitalizing on strong AI tailwinds, SMCI’s P/E ratio is “extremely low.” Currently at 13, it is already undervalued and is projected to drop below 10 in the coming years. “Thus,” KM sums up, “the stock looks extremely undervalued from the forward P/E ratio dynamic perspective.”
With that in mind, KM Capital rates SMCI a Strong Buy, betting that the company’s next chapter will be about AI dominance – not controversy. (To watch KM Capital’s track record, click here)
However, that’s not the prevalent view on Wall Street right now. The stock claims a Hold (i.e. Neutral) consensus rating, based on 3 Holds and 1 Buy and Sell, each. At $29.75, the average price target suggests shares will drop by 30% in the months ahead. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.