Super Micro Computer Inc (NASDAQ:SMCI)’s startling 15% nosedive in pre-market trades demonstrates the pitfalls of hyper-inflated share valuations amid the artificial intelligence (AI) hype machine.
Despite the Californian IT solution provider’s share price falling sharply, its fourth-quarter financial results were objectively decent.
The company reported net sales of US$2.18 billion, marking a rise from US$1.28 billion in the previous quarter and US$1.64 billion year-on-year.
Gross margins stood at 17.0%, slightly down from 17.6% in both the third quarter of 2023 and the same period last year.
Net income for the quarter reached US$194 million, more than double the US$86 million of the preceding quarter and higher than the US$141 million from the same quarter of the previous year.
As of June 30, the company's cash position was robust, with cash and cash equivalents totalling US$440 million, offset by a bank debt of US$290 million.
For the entire fiscal year 2023, Supermicro's net sales amounted to US$7.12 billion, up from US$5.20 billion in 2022. The net income for the year was reported at US$640 million, a sharp increase from the previous year's US$285 million.
Looking forward, the company is projecting net sales to be in the ballpark of US$9.5 billion to US$10.5 billion for the whole of 2024.
All of this wasn’t good enough to please investors though, who were apparently hoping for a strong AI sales forecast that failed to materialise.
Despite being knocked 15% lower to US$295.99, Supermicroshares remain over 300% higher year to date on a 30-times price-to-earnings ratio, making the shares considerably more expensive than the Nasdaq average.