After troubling months dominated by accounting concerns, the share price of Super Micro Computer (NASDAQ: SMCI) is rallying after it emerged that the artificial intelligence (AI) giant had no misconduct.
At the close of trading on December 2, SMCI was at $42, gaining over 28% for the day. In the past month, the stock has been up 61%. In 2024, SMCI has rallied 47%. In pre-market trading on December 3, the equity is up over 6%, trading at $44.
Why SMCI stock is rallying
This renewed momentum emerged after a special committee reaffirmed there was no evidence of misconduct at the AI server manufacturer.
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According to the committee’s findings, the report indicated no concerns about the integrity of senior management or the accuracy of financial statements, concluding that there was no feud or misconduct.
The three-month investigation led to Kenneth Cheung’s appointment as chief accounting officer, replacing CFO David Weigand amid ongoing organizational reforms.
The investigation into SMCI was initiated after the company’s previous auditor, Ernst & Young, raised concerns over the accounting practices in July. These concerns eventually resulted in EY resigning in October, further increasing volatility for SMCI stock.
“Among its findings, the independent Special Committee determined that the resignation of the Company’s former registered public accounting firm, Ernst & Young LLP (“EY”), and the conclusions EY stated in its resignation letter were not supported by the facts examined in the Review,” the report stated.
Before the current troubles, Super Micro’s stock surged to a record high of $119 in March but plummeted 84% to $18 in October, following accounting issues highlighted by short-seller Hindenburg Research, which accused the company of manipulation.
At the same time, fears of delisting from Nasdaq grew after the company missed its Securities and Exchange Commission (SEC) filing deadline. Still, it submitted a compliance plan and hired BDO as its new auditor, avoiding delisting for now.
Generally, investors seem confident that Super Micro can meet Nasdaq’s requirements, with a potential February filing deadline if the plan is approved.
Wall Street analysts take on SMCI stock
In the wake of the recent troubles facing the AI company, several Wall Street analysts have issued their outlook for the stock.
In this case, Barclays lowered its target from $438 to $42, Wedbush from $62 to $32, JPMorgan (NYSE: JPM) from $50 to $23, and Goldman from $67.5 to $28.
Only JP Morgan issued a ‘sell’ rating among the analysts, while the rest opted for a ‘neutral’ outlook.
With all factors considered, the investigation report is a much-needed boost for SMCI, which could anchor the equity to target new highs.
Featured image via Shutterstock
