Why super micro computer stock is falling today

Super Micro Computer (SMCI -6.79%) is hit by another round of big sales on Friday. The company’s stock price was down 5.5% at 3:15 p.m. ET, according to data from S&P Global Market Intelligence.

Supermicro, as the company is sometimes called, saw its stock retreat following another bearish cover story by a big Wall Street name. Adding another source of selling pressure, today’s report from the US Labor Department came in with weaker-than-expected results.

JP Morgan no longer has a bullish rating on Supermicro shares

In a report released before the market opened today, JP Morgan downgraded Super Micro Computer from an overweight to a neutral rating. JP Morgan analysts cut their one-year price target for Supermicro stock from $950 per share to $500 per share. Despite the downgrade, the new target would still suggest an upside of around 28% based on the stock’s current price.

JP Morgan analysts said the decision to downgrade the stock was not directly related to the short report that was published by Hindenburg Research earlier this month. They also said the downward revision was not prompted by concerns that Supermicro would have trouble coming back into compliance with Securities and Exchange Commission (SEC) regulations following the late filing of its annual 10-K report. Instead, the rating and price target cuts were driven by an apparent lack of near-term catalysts for new investors to enter the stock and concerns about sales and price pressures from competition.

The latest jobs data also drags Supermicro stock lower

Investors were looking to today’s report from the Labor Department for indicators on the health of the US economy and were not happy with the results. Analysts and economists have already started to reduce their expectations for the number of jobs in August; the median estimate was that 160,000 jobs were added last month. But the report showed that only 142,000 jobs were actually added during the period.

August’s jobs numbers added to concerns that the US economy may be headed for a recession. The Federal Reserve is expected to cut interest rates later this month, which should be a positive catalyst for economic activity, but some observers are concerned that it may not be enough to avoid an economic contraction. Investors looked to interest rate cuts as a key bullish catalyst for the stock market, but the specter of a possible recession took the shine off the Fed’s anticipated policy shift.

As a result, Super Micro Computer and other growth stocks are seeing huge sales today. But if you’re risk-tolerant, Supermicro shares could be a worthwhile addition to your portfolio.