Super Micro Computer Stock Drops 37.6% in August: Here’s Why

Actions of Super Micro Computer (NASDAQ: SMCI) fell 37.6 percent in August, according to S&P Global Market Intelligence data. The server systems maker took two heavy hits last month, and shares are now trading 64% below their March peak.

News that moves the market

First, Supermicro reported its fiscal fourth quarter 2024 results on August 6. Earnings were well below both Wall Street consensus estimates and management guidance as Supermicro’s cost of sales rose faster than revenue. The increase in operating expenses also influenced the net profit. In addition, earnings estimates for the next quarter were below average analyst forecasts.

Management also announced plans for a 10-for-1 stock split that day, but investors focused on the bottom line. Shares closed 20.1% lower the next day.

The second big drop happened near the end of the month. A popular short-selling service posted a negative review of the company on the same day that Supermicro announced that the filing of its full-year 10-K report would be delayed. It’s hard to say which event hit the stock harder, but the overall effect was a single-session price drop of 19%.

Supermicro’s long-term shareholders are still doing great

The triple whammy of disappointing earnings, late financial filings and a critical analyst report took the shine off Supermicro, but its long-term performance was still impressive. There are 3,692 stocks in the US market with at least five years of trading history. Supermicro leads the pack with a five-year compound annual growth rate of 95.1%.

So don’t cry for long-term Supermicro investors right now — the latest trend-followers are the ones left in the hand.

Moreover, the stock looks reasonably affordable right now, trading at 4.9 times trailing sales and 9.5 times forward earnings estimates. The boom in artificial intelligence (AI) has created a high and sustained demand for powerful computing systems, and Supermicro remains well-positioned to exploit this trend. If you had kept your hands off Supermicro’s rising stock earlier this year, this steep price drop could have created the buying opportunity you’ve been looking for all along.

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Anders Bylund has no position in any of the shares mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Super Micro Computer Stock Drops 37.6% in August: Here’s Why Originally published by The Motley Fool