George Tsilis does not believe that Super Micro Computer Inc. (NASDAQ: SMCI), has a competitive edge over its competitors.
He is the senior market contributor at Schwab Network.
Supermicro is a liquid-cooled server manufacturer that has been around “for quite some time”.
SMCI is competing with behemoths such as HPE, Dell and IBM. These companies may be a better choice, given that SMCI continues dealing with concerns about its accounting practices and regulatory issues.
Supermicro shares are down 10% on Friday.
Supermicro is losing its customers
Super Micro Computer’s sales have more than doubled compared to last year, confirming the demand for their products.
The sustainability of its growth in sales has been questioned following a US investigation into its accounting practices, and an alleged violation of export laws related to China and Russia.
Elon Musk, a billionaire, recently decided to switch from Supermicro Dell for the artificial intelligence servers he requires for xAI.
Tsilis is dovish about SMCI because of its unique episode with Ernst & Young.
“I don’t think Enron’s or WorldCom’s Accounting firms have abandoned them.” In a recent interview, he said that this was a big red flag.
Supermicro shares have fallen more than 70% since their March high.
Why can’t SMCI become the next Autodesk?
The sharp sell-off could have set up Supermicro for a solid return in 2025, as long as accounting issues don’t cause it to negatively revise past earnings.
This is what happened to Autodesk.
Tsilis noted that “the stock went down and valuations became very compelling. They didn’t restate earnings and since then, the stock has been reaffirmed as a buy by multiple analysts and has moved higher.”
BDO has been named as Super Micro Computer’s new independent auditor.
Analysts are unsure how to value SMCI’s shares without the transparency of management’s guidance on earnings and sales, he said.
Is Supermicro stock a good investment?
The current concerns make it unlikely that SMCI’s stock will be able to reach its previous highs next year.
The share price of the company could still be a good investment in 2025, if the management provides financial information and gives more detail on the outlook.
Currently, Supermicro’s short interest is over 17%. The possibility of a squeeze is still on the table.
Wall Street has given Super Micro Computer a consensus rating of “hold”. Analysts expect its stock to rise by $41 on average.
This post Will Supermicro stock rise again in 2020? The look ahead may change as new information unfolds
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