By Super Micro Computer Inc (NASDAQ: SMCI) has been a big disappointment for its shareholders in 2024.
The past six months have been an endless streak of bad news for this artificial intelligence company that was once being touted as a better pick than Nvidia.
First, it was disappointing earnings for the fourth quarter, then came the Hindenburg short report that followed a delay in filing 10-K, and then most recently, there have been talks of a DOJ investigation as well.
Still, if you’re already invested in Supermicro stock, it may be a smart move to not panic-sell it just yet.
Supermicro stock sell-off may be overdone
Despite recent challenges, Super Micro Computer looks fairly positioned for long-term growth.
Yes, Hindenburg did cite accounting manipulation as it disclosed a short position in the Nasdaq-listed firm last month that scared many investors. But SMCI has already refuted the accusation as “false or inaccurate”.
The AI server company has eased concerns related to the annual report delay as well, saying it does not expect material changes to earnings. So, the Hindenburg news is nothing more than “he said, she said” at least so far.
Additionally, the US Justice Department is yet to confirm that it has indeed launched a probe into Supermicro – and even if it does, an investigation wouldn’t automatically make SMCI a culprit.
So, as evident, much of what Supermicro stock has lost over the past six months (more than 65%) may have been attributed more to hearsay than pure facts.
Supermicro stock could rally after 10-for-1 split
Super Micro Computer shares may be worth buying following the massive rip also because its management recently announced plans of a 10-for-1 stock split that is slated to go live on October 1st.
Historically, stock splits tend to be a tailwind as they make shares of a company more accessible for retail investors. In fact, since 1980, stocks have sharply outperformed the benchmark index in the 12 months after the split, as per a recent study.
So, while past performance doesn’t always guarantee future returns, if Supermicro stock does end up respecting the tradition, those who are currently invested in it may be in for a treat in 2025.
In conclusion, if you already have a position in Supermicro stock, it may be worth sticking to it for now. But if you’re interested in building a position from scratch, it may be a better idea to wait and see how the DOJ news unfolds in the weeks ahead before making a move.
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