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Why Super Micro Computer Stock Sank This Week
Super Micro Computer (NASDAQ: SMCI) stock lost ground over the last week of trading. The server company's share price ended the period down 17% from last week's market close, according to data from S&P Global Market Intelligence.
Supermicro stock fell this week following bearish coverage from analysts at JPMorgan. Despite assurances that the stock is on track to avoid being delisted, investors also continued to weigh the risk that the company's shares could be removed from the Nasdaq exchange.
JPMorgan sees more downside ahead for Supermicro stock
JPMorgan published new coverage on Supermicro on Dec. 10, maintaining an underweight rating on the stock. The firm maintained a one-year price target of $23 per share. Even after a big sell-off this week, JPMorgan's price target implies additional downside of roughly 37%.
JPMorgan published its coverage after participating in a meeting with Supermicro's management. The server specialist said that it was seeing no significant loss of orders despite recent reports to the contrary, and management also said that it was still on track to begin ramping up production at its factory in Malaysia in the second half of its 2025 fiscal year.
But despite Supermicro's strong position in customized artificial intelligence (AI) servers and reassurances from management, JPMorgan remained bearish on the stock. While the tech company said that it was on track to submit the financial filings needed to regain compliance with the Securities and Exchange Commission (SEC) and Nasdaq by Feb. 25, some investors are still worried about the stock's outlook. If Supermicro fails to meet new filing deadlines or needs to significantly restate previously reported results, its share price could crash again.
What comes next for Super Micro Computer?
After the market closed on Friday, Bloomberg reported that Supermicro had hired Evercore to help the company raise funds. The news could create more downward pressures for the stock in the near term.
According to Bloomberg, the tech specialist is looking to raise operating capital by selling new stock and taking on debt. Supermicro is reportedly approaching private equity firms to see if they are interested in investing in the company. Potential fundraising moves are said to still be in the early stages, and it's possible that the company won't move forward with such a move.
On the other hand, selling more stock would have a diluting impact for existing shareholders. Offering new shares and taking on debt also raises questions about the company's profitability and working capital foundations. The company recently said that it believed it had sufficient working capital to operate at a scale generating between $5.5 billion and $6 billion. If Supermicro announces a substantial new share offering, its already volatile stock could tumble.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
