It was an important day for Charles Liang.
Super Micro Computer CEO (CISM) appeared on CNBC's “Mad Money” on July 15 following news that the company, which specializes in high-end servers, would join the Nasdaq 100 within a week.
Related: Short seller slams Super Micro stock in latest report
“It's a great honor,” he told Jim Cramer, the show's host. “We're very excited to be a Nasdaq 100 company.”
“I think it's important for people to understand that the growth you have is so large that sometimes you have to necessarily outpace your earnings to continue to grow,” Cramer said. saying“something I fully support because most companies don't have growth like yours.”
The growth was truly impressive. Super Micro shares more than tripled (264%) in the first quarter alone and are almost 76% higher than a year ago.
But then things started to get complicated for the San Jose, California-based company.
The company's fourth-quarter report released earlier this month revealed some weakness in Super Micro's earnings story. Profit margins were squeezed by supply chain constraints tied to its liquid cooling technology and increasing competition from rivals such as Dell Technologies. (DELL) and HP Enterprise (Energy Efficiency) .
Short-seller Hindenburg Research then published a scathing report on Super Micro, claiming it had found “clear accounting red flags, evidence of undisclosed related-party transactions, sanctions and export control lapses and customer issues.”
Analyst lowers Super Micro price target
A day after the Hindenburg report was released, Super Micro said it would not file its annual report on Form 10-K with the SEC for the fiscal year ended June 30 on time and that it expected to file a late filing notice.
“SMCI is unable to file its Annual Report within the prescribed time period without unreasonable effort or expense,” the company said in a statement. Statement of August 28“Additional time is needed for SMCI management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024.”
Related: Analysts revise Super Micro stock price targets after Q4 earnings
Super Micro did not immediately respond to a request for comment.
“When something like this happens, many institutional owners can't afford it,” TheStreet Pro said. Doug Kass“After reading Hindenburg Research's brief report, many institutional owners should not want to own the company. The company is not as attractive as it appears.”
Super Micro shares were up 1.2% at $448.21 at last check.
Kass said it's “a white-line, commodity server manufacturer that still trades at a huge valuation.”
“But if you look at it more closely, and I admit I may not be entirely right, if you add up all the ETFs, it looks like 80% of the stocks are owned by retailers,” he said. “Plus, there are all the options and other things that are added together, which are owned by retailers. That's why, in my opinion, the stocks haven't gone down any further and are still trading where they are.”
“Retailers just don't care, they don't understand these things, they buy what's expected at the moment and not the future cash flow, the whole deal,” Kass added. “Passive index funds just sit there.”
Wells Fargo then lowered its price target on Super Micro to $375 from $650, while maintaining an equal weight rating on the stock.
It's a brutal blow, and stock price cuts of that size are not common.
The investment firm said the stock was under significant pressure following the announcement of the delay in filing its 10-K form.
Wells Fargo has taken note of Hindenburg Research's report. Given the uncertainty and concerns about revenue recognition and Super Micro's history, the firm has lowered its price target for the stock.
Related: Veteran fund manager sees world of trouble ahead for stocks