Up 14% Today, Is Super Micro Computer Stock Finally Out of the Woods?

Super Micro Computer Inc. (SMCI) is surging this morning, up over 14% after the completion of an independent review of its internal controls by a special committee. The internal probe found no evidence of fraud or misconduct on the part of management with regard to revenue recognition, rehiring employees, export controls, or related party disclosures - all issues that Hindenburg Research flagged in its August short seller report. 

SMCI’s statement also indicates that the comments made by former auditor Ernst & Young in its resignation letter were not supported by the facts of its investigation. Management confirmed that it does not expect to restate any financial results for fiscal 2024 or previous years, and said it expects to complete its delayed 10-K within the grace period to retain its Nasdaq listing status.

The internal probe yielded several recommendations to improve corporate governance at Super Micro Computer, including the appointment of a new Chief Financial Officer, Chief Accounting Officer, and Chief Compliance Officer, and an expanded legal team. SMCI says it has adopted all of the committee’s recommendations. However, the committee did not recommend that the roles of Board Chair and CEO be split, as some analysts have suggested, which means co-founder Charles Liang will retain ultimate oversight.

SMCI has spent the past couple of weeks working its way out of deeply oversold status, and has rallied more than 113% from its mid-November lows. However, the wildly volatile stock is still down about 70% from its March highs.

Analysts now rate the troubled artificial intelligence (AI) server stock a “Hold” overall, down from “Moderate Buy” previously - and less than a month ago, SMCI stock was slapped with a new Street-low price target of $15 at Susquehanna following its preliminary quarterly results. That suggests an expected decline of nearly 60% from current prices.

While investors are reacting positively to the latest update on Super Micro’s financials, it should be interesting to see if any of the Wall Street analysts who have suspended their ratings or downgraded the stock in recent months share the same enthusiasm.