Super Micro Computer (NASDAQ: SMCI) stock was one of the strongest performers in the semiconductor stock sector, adding over 300% to its value from January 1 to the first half of March; however, since then, SMCI shares have experienced significant volatility.
Most notably, the post-earnings trading period on August 7 was highly volatile for SMCI stock. Indeed, SMCI shares experienced a swing of almost 40% in value, adding 20% in the after-market on August 6 and then erasing the same amount in the August 7 trading session, which settled its price at $492.70 level at the close, effectively putting the price of SMCI shares in the same range it was at the end of January.
Wall Street is starting to lose confidence in SMCI stock
In their Q4 earnings, SMCI revealed adjusted earnings per share (EPS) of $6.25, which fell short of the expected $8.25. The company’s net sales for the quarter reached $5.31 billion, slightly below the anticipated $5.32 billion.
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After weaker-than-expected results, Wall Street analysts started reassessing their 12-month price targets to reflect the most recent earnings release.
On August 7, Bank of America downgraded Super Micro Computer stock from a “buy” rating to “neutral” while lowering its price target to $700 from $1,090.
Analyst Ruplu Bhattacharya noted that while the company’s long-term benefits from artificial intelligence (AI) remain promising, the next few quarters are expected to be challenging.
Bhattacharya believes that gross margins are unlikely to return to their normal range until the end of 2025.
On the same date, Goldman Sachs’ analysts pointed out the gross margin challenges that persist due to SMCI’s highly competitive environment and expressed concerns about short-term margin guidance. Analysts lowered their price target to $675 from the previous $775.
In one of the most significant downgrades, Barclays’ analysts lowered their price target from $1,000 to $693 while maintaining their “neutral” rating over the same margin concerns as their colleagues.
Similarly, Wedbush analysts maintained a “neutral” rating on SMCI stock while lowering the price target from $800 to $620.
SMCI stock still has some supporters on Wall Street
Disregarding the concerns from their colleagues, Rosenblatt analysts maintained their “buy” rating on SMCI shares, with an unchanged $1,300 target, representing an over 160% increase from the current price levels.
They support their rating by arguing that liquid cooling and hyper-scale engagements will help the chipmaker tackle the problem of shrinking margins over the long run.
While expressing similar concerns as other experts on Wall Street, JPMorgan’s analysts maintained their “overweight” rating while keeping the $950 price target, believing that the next quarter will provide a clearer picture of the margin performance.
The prevailing sentiment on Wall Street regarding SMCI stock seems bearish; however, the chipmaker still has some analysts in its corner, who are patient and keen to see improvement in the upcoming quarters.
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