After two straight days of selling, Super Micro stock is wavering on Thursday. Shares might look cheap enough to draw in some buyers despite a pair of issues weighing on the stock.
Super Micro secured an extension to file its annual and quarterly reports by Feb. 25, dodging the immediate threat of delisting from the tech-heavy stock exchange Nasdaq.
The stock might avoid being delisted from the Nasdaq stock exchange—but it looks destined to be removed from the Nasdaq 100 index. Both issues have been at the top of investors’ minds. The stock, which trades under the ticker SMCI, closed slightly down 0.9% on Thursday. It fell 5.6% Wednesday and 8.2% Tuesday.
A delisting from the Nasdaq looks unlikely at this point. The company recently secured an extension from the Nasdaq to file its annual and quarterly reports by Feb. 25, avoiding the immediate threat of delisting. Earlier this week, CEO Charles Liang said that these reports would be filed on time.
These reports were delayed in late October when its auditor, Ernst & Young, resigned, saying they didn’t want to be associated with Super Micro’s financial statement. Super Micro said it disagrees with the auditor’s decision, said a board-appointed independent committee didn’t find any evidence of misconduct or fraud, and appointed BDO as its new auditor.
What looks more likely is removal from the Nasdaq 100, which has little to do with Super Micro’s accounting issues. That index is made up of the Nasdaq’s largest nonfinancial companies. As per the last trading day of November, the date used to rebuild the index, Super Micro is one of the current Nasdaq 100 components with the lowest market values.
Funds and indexes based on the Nasdaq 100 are significant, and companies added to the Nasdaq 100 can rally as managers buy the stocks.
Super Micro didn’t respond to a Barron’s request to comment for this article.
Outside of the stock’s valuation, Super Micro’s business appears solid. Orders for the artificial intelligence server maker, which produces servers for the likes of chip giant Nvidia, still look robust. JPMorgan analyst Samik Chatterjee pointed out last week that Super Micro’s customers aren’t fleeing the company in the way investors recently have.
“Despite market speculation about customers moving orders to other vendors, management reassured investors that its customer base remains strong, with no significant signs of changes to order allocations,” Chatterjee said.
The question for investors is how much of these risks they are willing to take on. As of Thursday, the stock was up 33.4% this year. But the recent drop in Super Micro’s stock price, down about 14% this week, indicates some investors may be increasingly unwilling to take on that risk.
Shares are currently trading at just 12 times forward earnings and are cheaper than peers, making it an attractive investment—if you’re willing to take the risk.
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