Where Is It Heading In 2025?
Super Micro Computer’s low price may be a buying opportunity if you can accept the risks.
Super Micro Computer (SMCI) stock was a roller-coaster ride in 2024. The circumstances contributing to SMCI’s rise and fall have angered some shareholders and polarized analysts, prompting ratings from sell to strong buy. So, what’s next for Super Micro in 2025? Let’s review the relevant factors to decide.
Super Micro Computer Overview
Super Micro Computer makes and sells high-powered server and storage solutions. Like Nvidia (NVDA), Super Micro has delivered consensus-beating performance on strong demand for its AI-capable hardware—including servers and liquid cooling systems. Energy-efficient liquid cooling systems are increasingly becoming must-haves for high-powered data centers.
One of Super Micro’s competitive advantages is its ability to deploy custom server solutions quickly. The company also has important AI computing partnerships with Nvidia and Fujitsu.
In August 2024, short seller Hindenburg Research published a report alleging accounting manipulation at Super Micro. This is the company’s second reported accounting issue in recent history. In 2020, the SEC fined Super Micro and its former CFO for prematurely recognizing revenue and understating expenses.
Super Micro’s leadership team has denied the 2024 claims of accounting manipulation. However, the company has not filed financial statements with the SEC since reporting its March 31 quarterly results in May 2024. Failure to file on time is grounds for delisting by the Nasdaq.
The company requested a filing extension to avoid delisting. Nasdaq has given Super Micro until Feb. 25 to report on the June and September quarters of 2024.
Super Micro Computer’s Current Financial Performance
The following financial review of Super Micro considers third and fourth-quarter earnings releases and a preliminary first-quarter report released in November 2024. This data may be unreliable if the Hindenburg allegations are partially or wholly true.
Key Financial Metrics
Here is a look at SMCI by the numbers per the fiscal-year 2024 earnings release:
- Market capitalization: $19 billion
- Annual revenue: $14.9 billion
- Gross profit margin: 14%
- Diluted EPS: $2.01
- Operating cash flow: ($2.5 billion)
- P/E ratio: 16.35
- Debt/equity: 0.40
According to the available financial statements, SMCI doubled annual revenue and grew diluted EPS by 60% in fiscal year 2024. CEO Charles Liang attributed the increases to “record demand of new AI infrastructures.”
Preliminary results for the first quarter of fiscal 2025 show continued sales growth and a lower gross margin. Estimated results included first-quarter 2025 sales of $5.9 billion to $6 billion and gross margin of 13.3%. Sales and gross margin in the prior-year quarter were $2.12 billion and 16.7%, respectively.
Overall Financial Health
Through the calendar year 2023, Super Micro had minimal long-term debt. In 2024, the company sold $1.725 billion in convertible notes to institutional investors. The notes carry 0% interest and are due in 2029. They can be redeemed early under certain conditions.
The senior notes raised SMCI’s debt-to-equity ratio from nearly zero to a reasonable 0.40. Super Micro has said it will use the proceeds to fund working capital and growth.
With low debt and strong demand for its AI-capable server systems, Super Micro appears healthy financially. The company’s extreme growth starting in 2022 did pressure cash flow and margins. But after the 2024 convertible notes issuance, Super Micro should have more than $1.5 billion in cash on its balance sheet.
Stock Performance In 2024
SMCI gained almost 8% in 2024, but it was a wild ride. After starting the year at about $28 per share, the stock eclipsed $115 in March. At that point, SMCI was one of the best growth stocks of the year. Then, the stock fell into the $50s after the company announced a sizable gross margin decline. The release of the Hindenburg Research report pushed the stock down further.
SMCI stock was trading for $18 in late October, before climbing back to the $30s by year-end.
Note that SMCI completed a 10-for-1 stock split in September 2024. The stock values shared are adjusted for that split.
Factors Influencing SMCI’s Future Outlook
The fallout from the reports about alleged accounting irregularities will shape SMCI’s near-term prospects. Other factors to watch include the demand for AI servers and innovation from competitors.
Alleged Accounting Problems
Short sellers are in the business of convincing the public that certain stocks are worthless. Recognizing that short sellers benefit from stock price declines, many investors respond to short-seller claims with healthy skepticism.
In the case of Super Micro, the Hindenburg Research report did prompt a sell-off as investors weighed corroborating evidence of misconduct. As noted, this isn’t the first time SMCI has been accused of departing from accepted accounting practices. The prior accounting investigation prompted a temporary delisting by the Nasdaq and hefty fines from the SEC. There was no admission or denial of guilt by Super Micro at that time.
The Hindenburg report alleges the company rehired executives who were fired in the wake of the first SEC investigation. The report also says the SMCI restarted unlawful revenue recognition practices months after settling with the SEC. Super Micro has denied the Hindenburg claims, calling them “false or inaccurate.”
More concerning was the October 2024 resignation of SMCI’s accounting firm Ernst & Young. The company’s extended delay in publishing financial statements also sends a problematic message.
How SMCI moves through this crisis is uncertain. In December, the CEO Liang expressed confidence that the stock would not be delisted. But Super Micro may have lost the trust of the investing public and that will take time to earn back—no matter how strong the business is.
AI Demand
Research firm Gartner predicts data center systems spending will grow from $318 billion in 2024 to $367 billion in 2025. That equates to a 15.5% increase. The growth should benefit SMCI as a preferred provider of AI-capable server systems, storage and cooling systems.
Competition
SMCI’s accounting troubles present an opportunity for competitors. Super Micro is a market share leader in AI servers, a subset of the broader computer hardware segment. Large and small hardware providers would benefit from stealing the AI crown as Super Micro works to repair its reputation.
Super Micro Computer competitors include Dell Technologies (DELL), HP (HPQ), Hewlett Packard Enterprise (HPE), Pure Storage (PSTG), Seagate Technology (STX), Logitech International (LOGI) and PAR Technology (PAR). For more AI investing ideas, see this best AI stocks for 2025.
Analysts’ Predictions for SMCI In 2025
Analysts’ average price target for SMCI is $62.03, which is 85% higher than the stock’s current value of about $33. Two analysts have downgraded the stock since October. After those downgrades, the average rating is hold.
The income statement outlook for SMCI remains promising. Analysts expect 70% revenue growth and 48% EPS growth in fiscal year 2025. The percentages equate to revenue of $25 billion and EPS of $2.97. Analysts expect continued, slower growth in fiscal year 2026—an estimated increase of 20% to 25% for revenue and EPS.
Where Is SMCI Heading In 2025?
Strong business performance can inspire investors to overlook other problems. If Super Micro can meet its February filing deadline and avoid delisting, investors will likely refocus on the company’s profit potential. Unfortunately, that potential could be less impressive than previously thought.
With correct accounting treatment, SMCI may have slower revenue growth and higher margins. Legal fees and settlements may also have an impact. The company has a Justice Department investigation to manage, plus a class action lawsuit filed by shareholders in October.
SMCI stock will probably be volatile throughout 2025. If the company can commit to lawful financial reporting without losing its competitive edge, 2026 will be a better year.
Bottom Line
Super Micro Computer was an AI success story less than a year ago. Today, the company is under a cloud, with a low stock price to prove it. The low price may be a buying opportunity if you can accept the risks. After all, the company has ample cash on the balance sheet and steep demand for its products. But the risks, including the possibility of SMCI getting delisted, are considerable.
For less risky investing ideas, see best stocks for 2025.
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