Barclays has reportedly downgraded Super Micro Computer Inc (SMCI) to ‘Equal Weight’ from ‘Overweight' while revising its price target to $438 from $693.
The brokerage cited the firm’s "poor" gross margin in the June quarter and the delay in filing its annual report "that evidenced several fundamental risks.” Shares of SMCI were down nearly 3.5% on Wednesday following the downgrade.
Barclays reportedly noted that SMCI has been giving away DLC (downloadable content) components for free to match or price them below the air-cooled rack pricing provided by Dell. This strategy coupled with supply chain constraints has put pressure on margins while eroding investor confidence, it said.
The analysts are also concerned that SMCI’s market share in GB200 servers might be smaller compared to its position with Hopper-based servers.
Retail sentiment on Stocktwits continued to stay in the ‘neutral’ territory’ (51/100) following the downgrade.
In late August, SMCI had announced a delay in the filing of its annual 10-K report for the fiscal year ending on June 30, 2024. The firm said it expects to file a notification of late filing on Form 12b-25 with respect to the annual report.
“SMCI is unable to file its Annual Report within the prescribed time period without unreasonable effort or expense. Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024,” the company said in a release.
The firm’s decision to delay its annual report followed Hindenburg Research’s disclosure of its short position on the stock.
The short-seller had stated that it possessed fresh evidence of accounting manipulation, sibling self-dealing and sanctions evasion by the firm. Hindenburg said its three-month investigation into the company found glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.
Although Stocktwits users are undecided on the stock as of now, some users believe there will be more clarity once the firm files the report.