Super Micro Computer (NASDAQ:SMCI) investors have endured one wild ride in 2024. After soaring to giddy heights in the year’s early part, the crash has been just as spectacular.
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Recent challenges have weighed heavily on the shares, with the company reeling from auditor Ernst & Young’s resignation, triggered by its failure to file the 10-K report on time. To make matters worse, SMCI has been grappling with the lingering threat of delisting from NASDAQ.
Tuesday’s trading session, however, added another twist to the saga. SMCI shares jumped 31% as the AI server maker unveiled a compliance plan submitted to the SEC in an effort to avoid delisting.
At the same time, SMCI announced the immediate appointment of BDO USA as its independent auditor. BDO USA is part of BDO International, the fifth-largest global accounting network, renowned for its auditing and assurance services to major private corporations.
“As such,” said Northland analyst Nehal Chokshi, “we do view the appointment of BDO as SMCI’s independent as a net positive as a first step to restoring investor confidence in trusting SMCI’s historical financials.”
However, Chokshi, who ranks in the top 1% of Wall Street stock pros, thinks there is a way to go now before investor confidence is fully restored. That is likely to happen only with the addressing of governance and oversight functions within the Board of Directors, particularly concerning its relationship with management – issues the 5-star analyst suspects were central to EY’s resignation.
While Chokshi acknowledges that many companies successfully combine the CEO and Chairman roles while maintaining Board independence, he argues that separating these positions at SMCI would help resolve “lingering corporate governance questions.” Furthermore, he believes this change would lead to “more productive personnel and prove to be a net positive” for the company’s future.
With the full report from the Special Committee still to come, the 5-star analyst says that “actions taken from that report is the biggest key to fully restoring investor confidence.”
In the meantime, until there is “clarity on corporate governance remediations,” Chokshi’s rating and price target remain suspended. (To watch Chokshi’s track record, click here)
Other analysts still have their models intact and the consensus view on Wall Street right now is that SMCI stock is a Hold (i.e. Neutral), a rating based on 6 Hold, 2 Buy, and 2 Sell recommendations. The average price target stands at $39.43, suggesting the stock will gain 39% over the next 12 months. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
