Super Micro Stock Plummets Amid JPMorgan Downgrade and Accusations

Super Micro Computer (SMCI), a key player in the data center server market and a top AI stock this year, has faced a rough few weeks. The stock has dropped over 30% since late August, following delays in filing its annual report and accusations of accounting manipulation from short seller Hindenburg Research.

Stock Downgrade by JPMorgan

On Friday, Super Micro’s stock dropped over 6% amid a broader sell-off in the tech sector. JPMorgan analysts downgraded the stock from "Overweight" to "Neutral" and slashed their price target from nearly $1,000 to $500.

JPMorgan’s Samik Chatterjee and his team explained their downgrade, noting, "As a result of our expectations for a near-term overhang for the shares from the uncertainty, we prefer to recommend new investors to remain on the sidelines till the company is back in compliance." However, the analysts clarified that the downgrade was not driven by concerns over the company's ability to regain compliance with regulators or the content of the Hindenburg Research report.

Investor Caution Advised

Chatterjee recommended that new investors wait on the sidelines until Super Micro resolves the issues with its annual report. The delay has raised concerns about potential impacts on customer orders and competitive pricing pressure from peers. Analysts expect the company to issue a response to retain customer trust, which may involve "aggressive pricing," according to JPMorgan.

Other Downgrades Following Delayed Financial Filing

Super Micro has faced additional downgrades from Barclays and CFRA analysts, who cited concerns after the company announced it needed more time to complete its internal controls and financial reporting for the fiscal year ending June 30, 2024. The company attributed the delay to management’s assessment of its internal controls over financial reporting.

Hindenburg Research Accusations

The announcement came just after Hindenburg Research accused Super Micro of "accounting manipulation." The short seller alleged that despite a $17.5 million settlement with the SEC in August 2020 for widespread accounting violations, the company’s practices had not improved. Hindenburg also claimed that executives who had left amid the scandal were later rehired.

In its report, Hindenburg labeled Super Micro a "serial recidivist" and suggested that the company continued to engage in questionable business practices.

A Volatile Year for Super Micro

Despite the recent setbacks, Super Micro has had a remarkable year, with shares soaring from under $300 in January to nearly $1,200 in March when the company was added to the S&P 500. The stock also joined the Nasdaq 100 index in July.

However, by Friday, shares had dipped below the $400 mark. Despite the significant decline, Super Micro is still up roughly 35% year-to-date. The company recently announced a 10-for-1 stock split, which will take effect on October 1.