Breaking News: Super Micro Computer (SMCI) Plunges 20% After Disappointing Earnings Report
Super Micro Computer (NASDAQ: SMCI) took a major hit on Wednesday, with its share price dropping by $125 (20%) after reporting its FY Q4/full-year numbers. Despite beating revenue consensus and announcing a 10:1 stock split, the company’s gross margin came in well below estimates, and forward guidance was much lower than expected.
In my previous analysis in February, I highlighted the red flags at SMCI, noting its low operating margin of 10.1%. Now, the operating margin has fallen to just 6%, making it significantly lower than industry peers like Amazon and Microsoft.
SMCI’s EPS declined 18.6% in Q4, even as revenues increased by 37.8%. This indicates the company’s lack of control over costs and pricing. With revenue concentration and accounts receivable payment risks, SMCI faces challenges from oversupply in the data center market.
Additionally, the company is burning cash at a rapid rate, raising concerns about its financial sustainability. With a corrected P/E of 25.5, SMCI still appears overvalued, especially as earnings continue to decline.
Looking ahead, I anticipate further earnings declines for SMCI, which could lead to a significant drop in its stock price. While the easiest money from shorting SMCI may have already been made, there is still potential for the stock to decline further in the coming year.
In conclusion, investors should be cautious when considering SMCI as an investment, given its low operating margins, declining earnings, and potential for further stock price depreciation. It’s essential to carefully evaluate the risks before making any investment decisions related to SMCI.