Super Micro shares still face accounting surplus despite delisting stay

By Tomi Kilgore

Stock jumps after Nasdaq extends deadline to file financial statements, but remains well below levels seen before auditor resigned

Shares of Super Micro Computer Inc. rebounded Monday after the server maker and artificial intelligence gamer was officially granted an extension by Nasdaq to file its audited financial results.

This effectively eliminates the risk of delisting, at least until February 25. The company said in a filing late Friday that the stock would remain listed as long as all required reports are filed by Feb. 25, which the company hopes to do. TO DO.

But despite the good news, which followed the conclusion of an internal investigation last week that the accounting problems that led to the filing delays were not the result of management misconduct, the actions of Super Micro were still hampered by its accounting problems.

The stock (SMCI) rose 2.4% Monday morning, but pared earlier gains of as much as 9.3% to hit an intraday high of $48. The stock has soared 150% since closing Nov. 14 at $18.01, its lowest level in 18 months.

The stock was still on track to open below its closing level ($49.12) before the company revealed that its auditor Ernst & Young had resigned due to concerns about the company’s governance and transparency. business.

It’s also still well below where it was before a bearish investor issued a report raising concerns about the company’s accounting practices, which would have ultimately led to a government investigation into the matter.

Read: Opinion: Why Super Micro’s legal problems might be deeper than they appear.

Reading the chart, Wall Street seems reluctant to give the green light, even if the accounting problems appear to be resolved.

As Wedbush analyst Matt Bryson wrote in a recent note to clients, there were still reasons not to intervene even after management was cleared of any misconduct.

Bryson said the company’s replacement of its CFO had not completely cleared the air, as it was “generally understood” that major decisions emanated from the chief executive’s office.

“While we do not expect (Super Micro) to encounter another issue with financial reporting per se, we believe the lack of apparent larger changes in (Super Micro’s) executive structure leaves it likely the company more open to future financial missteps (real or imagined),” Bryson wrote.

Bryson has a Neutral rating on the stock and a price target of $42, which is 6.6% below current levels.

The stock had already lost half its value since its March 13 record close of $118.81 following the bearish report on accounting issues, as investors were disappointed by the lack of updated guidance and follow-up reports on profits which raised concerns about margins.

So, despite doubling from the mid-November low, the stock continues to be anchored in a long-term downtrend.

The top of this downtrend channel currently extends just below $65, approximately 44% above current levels.

And the 200-day moving average, which many Wall Street chart watchers consider a dividing line between long-term uptrends and downtrends, stands at around $67.70, according to FactSet.

-Tomi Kilgore

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  12-09-24 1053ET
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