Super Micro Computer experienced another rough session on Friday, with its stock plummeting by 6.8%, as reported by S&P Global Market Intelligence. This recent downturn came after JPMorgan analysts downgraded their rating from overweight to neutral and slashed their price target from $950 to $500 per share. In a further blow, the Labor Department’s jobs report revealed that only 142,000 jobs were added in August, falling short of Wall Street’s anticipated 160,000.
The company’s share price has now tumbled 67.5% from its peak earlier this year. As the company approaches a stock split on October 1, should investors consider this an opportune moment to buy?
For those with a high risk tolerance, Supermicro’s stock might be attractive
Super Micro Computer has recently faced a barrage of unfavorable news. Its fiscal fourth-quarter report, released in early August, revealed margin concerns that alarmed the market, suggesting increasing competitive pressures. Later in August, Hindenburg Research issued a critical short report on the company. Additionally, Supermicro announced a delay in filing its 10-K report for fiscal 2024, which concluded on June 30.
Now, with JPMorgan downgrading the stock and significantly lowering its price target, the indicators seem overwhelmingly bearish. However, I believe some of these concerns are overstated. It’s important to note that Hindenburg Research is a short-seller, benefiting when a stock they bet against declines. Moreover, Supermicro has confirmed it does not anticipate making substantial changes to its reported fiscal 2024 results.
As for JPMorgan’s revised note, despite the lowered price target, their 12-month forecast of $500 per share still indicates a potential upside of approximately 29% from Friday’s closing price.
While Supermicro isn’t without risk, its shares, currently trading at around 11 times this year’s projected earnings, appear undervalued. For those investors comfortable with risk and market fluctuations, investing at this juncture could yield significant future returns.
