Super Micro Computer, Inc. (NASDAQ:SMCI) has been one of the most volatile large-cap stocks in 2024. Following a meteoric rise to all-time highs in March, Super Micro Computer stock now trades over 72% below those levels. The company, valued at $18.9 billion, faces significant challenges ahead of December 23.
A Tumultuous Year for Super Micro Stock
Super Micro’s trajectory has been turbulent. On Monday, the stock plunged over 8% in a single session, triggered by news that SMCI would be removed from the Nasdaq-100 Index ($IUXX) during its quarterly rebalancing. The reshuffle will take effect before the market opens on December 23, making room for newcomers like Palantir Technologies (NASDAQ:PLTR) and MicroStrategy (NASDAQ:MSTR).
This removal has opened the floodgates for institutional investors, who previously held SMCI stock for index-tracking purposes, to sell their shares. Combined with broader headwinds—including slowing revenue growth, narrowing margins, and allegations of accounting fraud—Super Micro Computer faces an uphill battle to regain investor confidence.
Will Super Micro Computer Need More Capital?
In August, Super Micro delayed its fiscal 2024 annual report filing, raising red flags on Wall Street. Adding to concerns, Ernst & Young—its auditor—resigned amid allegations of financial mismanagement, and the company is reportedly under a Department of Justice investigation.
Super Micro’s management aims to file its reports by February 2025 to avoid delisting from the Nasdaq exchange. However, recent reports suggest that the company is exploring additional capital-raising options through Evercore. This news comes on the heels of a $2 billion capital raise in March 2024, further intensifying scrutiny around its financial stability.
Despite these challenges, the company’s core business remains relevant. As a provider of AI-optimized servers and storage solutions, Super Micro is uniquely positioned to capitalize on the ongoing AI boom. However, uncertainty surrounding its financial health could impact its ability to attract new customers and expand existing partnerships.
Analyzing SMCI’s Valuation and Growth Potential
Super Micro’s growth in the AI sector is undeniable. From fiscal 2015 to 2024, its sales surged from $2 billion to $14.9 billion. Preliminary estimates for fiscal Q1 2025 indicate a revenue increase of 181% year-over-year, reaching $5.95 billion. Analysts project further growth, with revenues expected to hit $25 billion in 2025 and $30.2 billion in 2026.
On the earnings front, adjusted earnings per share (EPS) are forecasted to grow from $2.20 in 2024 to $4.20 by 2026. Despite these promising figures, SMCI stock trades at just eight times forward earnings, signaling a potential bargain for value investors.
Out of 11 analysts covering Super Micro Computer stock, the sentiment is mixed: one recommends a “Strong Buy,” one a “Moderate Buy,” seven suggest “Hold,” and two advise a “Strong Sell.” The average target price stands at $50.06, implying a 45.4% upside from current levels.
What’s Next for Super Micro Computer Stock?
The upcoming removal from the Nasdaq-100 Index marks a pivotal moment for Super Micro. While its AI-driven business model offers long-term growth potential, the short-term risks—including regulatory investigations and governance concerns—cannot be overlooked.
Investors are advised to adopt a cautious approach. While SMCI stock’s valuation appears attractive, its challenges are far from transitory. Resolution of its financial reporting issues and rebuilding trust with stakeholders will be crucial for a sustainable rebound.
Super Micro Computer’s story is a testament to the complexities of balancing growth and governance in the ever-evolving tech landscape. As December 23 approaches, all eyes will be on how the company navigates this critical juncture.
Featured Image: Freepik
Author Stephanie Bédard-Châteauneuf 
