New Price Target for Super Micro Could Be in Play After Compliance Scare
Depending on how Nvidia's earnings impact the firm, traders will want to keep an eye on this price target.
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What a relief! For some anyway.
Shares of Super Micro Computer SMCI screamed higher overnight after the firm finally filed its delinquent financial reports with the U.S. Securities and Exchange Commission just ahead of a deadline that would have had the firm potentially facing a delisting from the Nasdaq stock market. The stock closed down 11.5% on Tuesday as it had started to look unlikely that the deadline would be met. On Wednesday morning, after the opening bell, I see the shares up more than 15% for the day after having been more than 20% higher.
In the filing, Super Micro explained that the firm does not agree with its former accountant, Ernst and Young, which resigned from that position amid concerns that arose last August when famous short-seller Hindenburg Research issued a report that explained their position. The next day, Super Micro, without an accountant, announced the delay of its next annual 10-K annual filing.
Super Micro's Financial Filing
On Tuesday evening, the firm filed the delayed and audited annual report for 2024 as well as reports for the first two quarters of its fiscal 2025. Quoted from the filing:
"Due to EY's (Ernst and Young) stated concerns and subsequent resignation, we were unable to timely file our Annual Report and Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2024, and December 31, 2024, as required under Nasdaq's Listing Rule 5250. On December 6, 2024, Nasdaq granted us an exception to Nasdaq's Listing Rule 5250, allowing us to file all the Delinquent Reports by February 25, 2025."
Super Micro has made clear that its "Special Committee did not believe that the resignation of EY or the conclusions reached by EY were supported by the facts examined" in its review either back in October of 2024 or in its "final findings."
Interesting Data on Super Micro
In data compiled and reported on by Kim Khan of Seeking Alpha, the open interest — at least as of Wednesday morning — for SMCI $50 calls expiring this Friday was 16,332 contracts.
Those are now in play as are, depending on the last sale, an open interest of 14,716 contracts for the $55 calls expiring the same day. Should the $60 level move into the picture, then we are talking about another 31,237 contracts, so there will likely be some support for the equity at these levels going into the weekend if the stock holds, as these contracts were all minutes away from becoming nearly worthless.
Conversely, the open interest in the now "out of the money" February 28 $50 puts stands at 9,966 contracts. Those are currently trading for about a buck. Open interest for the $45 puts expiring this Friday have now traded down to about $0.25. Can these levels hold beyond the weekend as traders take profits on those calls going into Friday afternoon's closing bell and at least some investors take on the equity at those levels?
The firm will not report its third quarter until mid-May, where expectations are for an adjusted EPS of $0.53 on revenue of about $5.4 billion. That would be growth of 40% on the revenue side, but a contraction of 215 on the earnings side. That would be a reflection of contracting margins. Then again, a lot of that will have to do with what the firm's Super Micro Computer works with have to say and report. One of those reports tonight: Nvidia NVDA. Two others would be Advanced Micro Devices AMD and Intel INTC.
Super Micro Stock Charts
Forgetting the news flow, SMCI has traded since the start of 2024 within the confines of what has been prophesied by its technical patterns.
First, we had the "head-and-shoulders" pattern with the $65 neckline that produced the sharp sell-off. That was followed by an "inverse head-and-shoulders" pattern with a $45 neckline that seems to have produced some upside. Holding onto the 200-day SMA would be a bigger deal than simply hanging onto that neckline. It is a positive that the neckline proved itself as support on Tuesday.
Should the 200-day line hold, I could see the $63 level as a viable target price. I don't think we see more than that unless Nvidia knocks everyone's sock off tonight. If long the stock, the loss of that $45 neckline would be my panic point.
At the time of publication, Guilfoyle was long NVDA and INTC equity.
