1 Wall Street team believes the super micro computer stock will hit $438. Is it time to sell?

Concerns about Super Micro Computer (SMCI -6.23%) have grown among investors. Shrinking profit margins, concerns about accounting procedures and a delay in filing Supermicro’s 10K annual report have all hit the stock in recent weeks.

Now, Barclays Analysts George Wang and Tim Long warn investors to pull back from the stock as recent problems emerge. Analysts downgraded shares of Super Micro from a buy-equivalent rating to a hold rating in a recent report. They also cut their price target from $693 to $438 per share.

Anxiety about accounting questions

This is a reaction to lower profit margins reported by the artificial intelligence (AI) server provider in its fiscal fourth quarter, as well as concerns about the company’s accounting. Those concerns began after allegations in a short seller report and the company’s delay in releasing its annual Form 10-K report.

Those issues have helped create a selloff that has reduced Super Micro’s share price by more than a third in the past month.

The company itself sought to calm nerves. CEO Charles Liang published a letter to customers and partners this week seeking to reassure them that the business is operating at full capacity and has delivered market-leading volumes of highly sought-after liquid-cooled AI server racks.

He also reiterated that while the company is reviewing its financials, he doesn’t expect any material changes “based on the work we’ve done so far.” Liang also said the short seller’s report contained “false or inaccurate statements.” But that doesn’t mean investors should jump back right now.

The Barclays analyst team said:

We would like to see more transparency in financial disclosure regarding quarterly order intake and order backlog. While we remain bullish on the long-term outlook for AI, we believe the current risk/reward is balanced for SMCI.

This is a cautious summary that presents the current uncertainty. Until there is more clarity, it makes sense for investors to watch and wait. It’s not the time to sell, but it’s not the time to buy either.