Super Micro Struggles with Compliance and Growth Uncertainty: JP Morgan Downgrades Stock

Super Micro Computer Inc SMCI stock price tanked after JP Morgan analyst Samik Chatterjee downgraded the rating from Overweight to Neutral and lowered its price target from $950 to $500.

While the latest filings indicate that the company is working diligently to comply with regulatory requirements and that business is continuing as usual, Chatterjee noted that it is tough to get more visibility when the company is back in compliance with its filing requirements.

The analyst noted the Hindenburg report and the delay in the 10-K filing as separate events in themselves but expects the lack of visibility about the timing of the company’s return to compliance to create challenges to near-term sentiment about outcomes compared to the 2017-2020 time period and the severity of impact on financials.

Therefore, he recommended that new investors remain on the sidelines. Additionally, the analyst noted that Super Micro’s follow-up response to ensure an unchanged demand pipeline could involve higher price aggression, and the expectations for timing around the recovery of margins towards the long-term range would be a watch-point for investors over the next couple of quarters.

The price target cut reflects lower earnings multiple in line with traditional IT Hardware companies, which have much lower growth trajectories to account for the uncertainty.

The price target reflects Chatterjee’s updated calendar 2026 EPS estimate at a target P/E multiple of 10x (versus 19x prior) as exposure to strong AI-led compute demand is offset by the overhang from evaluating internal controls and delay in regulatory filings.

The analyst noted that Super Micro is positioned with a strong product portfolio, which includes full rack-scale solutions and liquid-cooled systems, and a unique building block approach to product development that enables quick product refreshes amid the AI-led strong compute demand outlook.

Chatterjee projects fiscal first-quarter 2025 revenue of $6.54 billion and EPS of $7.48.

Price Action: SMCI stock is down 7.11% at $384.58 at the last check on Friday.

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