Not all analysts are bullish on Super Micro Computer stock

Super Micro Computer had a very bad week.

The maker of liquid-cooled artificial intelligence servers was one of the brightest bulbs on the stock market earlier this year. But Super Micro shares have been battered since they peaked in March and were absolutely hammered last week when short seller Hindenburg Research tracked it down.

It didn’t help that Super Micro CEO Charles Liang announced a delay in filing quarterly results with the Securities and Exchange Commission.

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What happens to the Super Micro stock next is anyone’s guess, but the flash has not gone unnoticed. Many of the analysts who have weighed in so far are bearish. Wells Fargo, for example, cut its price target on Super Micro stock by more than 40%.

However, not everyone is convinced that the short report is “new” news, or that SMCI’s share price deserves to have fallen so much this week.

Charles Liang, CEO of Super Micro Computer Inc., during the AMD Advancing AI event in San Jose, California, USA.

Bloomberg/Getty Images

JP Morgan: Different view on Hindenburg SMCI report

Analysts at JP Morgan have a different view of the Hindenburg report.

The investment firm, which has an overweight rating on Super Micro Computer (SMCI) said it had seen limited evidence of accounting misconduct beyond the SEC’s review of the 2020 allegations.

Related: Major analyst delivers crushing blow after Super Micro share price crash

It also saw limited new information regarding the “existing and already known” business relationship with related companies owned by Liang’s brothers.

“Allegations of sanctions evasion are difficult to verify,” JP Morgan analysts said, “but it’s still worth noting that the scale of revenue referenced in the report does not change the medium-term revenue opportunity for the company relative to the server artificial intelligence addressable $275 billion (total addressable market) in 2026 and 2027.”

Super Micro’s challenges in 2018-2020 are known to investors, JP Morgan said.

The report “relies on a review of history to suggest similar practices at this time and cites ‘Our investigation found major corporate governance red flags and evidence of improper revenue recognition…’ without detail.”

The report also highlights some rehirings as evidence of a repeat of past practices, JPM said, though with limited details about the correlation between the two.

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“Interestingly, evidence about recent culture and practices is based on interviews with former employees in all cases cited in the report,” JPMorgan said.

The firm said it viewed the report “as largely lacking in detail on the company’s alleged wrongdoings changing the medium-term outlook and largely revising already known areas for improvement in corporate governance and transparency”.

“Not surprisingly, the company has areas for improvement to further refine its governance, transparency and investor communication, which would be more appropriate for a company of its size, following its recent growth spurt coupled with demand of AI servers”, JP. Morgan said.

“However, its absence does not immediately suggest wrongdoing on the part of the company in our view,” the firm added.

Evercore analysts shift focus to Dell, others

However, there are other investment options in the AI ​​server space, and given the adage “where there’s smoke, there’s fire,” some analysts are pivoting.

Related: Analysts Revise Dell Share Price Target Ahead of Earnings

Analysts at Evercore ISI said that given some recent negative concerns about Super Micro, “it is critical to think about the competitive landscape when it comes to AI servers.”

The company said Dell (della) was poised to gain traction and “remains a logical partner for customers seeking better/different supply chain diversity and, crucially, a strong service offering throughout the implementation lifecycle.”

Evercore ISI said its view remains that key customers such as CoreWeave and “Musk companies” of electric vehicle maker Tesla, social media platform X and supercomputer developer xAI are “dual-sourcing production” for both Dell and Super Micro.

The firm said HP Enterprise can “potentially expand into some of these ramps as well.”

Evercore ISI, which maintained an outperform rating and $140 price target on Dell shares, estimated that Dell AI server revenue is on track to top $8 billion this year and likely top $10 billion next year.

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