Super Micro Computer’s (SMCI) stock has rebounded after a special committee found no evidence of misconduct by management or the board of directors, clearing fraud allegations. The company’s strong growth story and attractive valuations have raised concerns, however. Despite this, the author maintains a neutral stance due to potential volatility and headwinds ahead.
The recent controversy surrounding Super Micro Computer was sparked by Hindenburg Research, which accused the company of accounting manipulations and selling products to businesses connected to them. However, a special committee found no evidence of misconduct, clearing the allegations and sending SMCI shares soaring.
While the stock’s valuations remain attractive, concerns about the company’s growth story persist. Super Micro Computer is well-positioned in a booming niche driven by Generative AI, but its preliminary Q1 results show a Q2 revenue guidance of $5.8 billion, 15% below consensus. This miss could signal potential issues with supply-demand dynamics or inventory allocation.
Gross margins have already been on a downward trend since Fiscal 2024, falling from 17.5% to 13.3% over the past four quarters. The company’s strong growth and attractive valuations make it an undervalued stock, but volatility and headwinds ahead remain concerns.
The author prefers to wait for the dust to settle before making a more optimistic decision regarding SMCI’s investment thesis. While the charges have been cleared, significant volatility is expected, and the company will need to deal with changes in its C-suite and shrinking margins.
Source: https://finance.yahoo.com/news/fraud-allegations-cleared-super-micro-224114768.html