Super Micro Computer Inc (NASDAQ:SMCI) said its 'special committee' found no wrongdoing but broker Wedbush cut its target price on the stock for the second time this week.
This follows preliminary earnings from the server maker overnight, where revenue indications from the previous quarter and the coming quarter were trimmed.
SMCI suggested the internal probe from its committee has so far found no wrongdoing after the recent resignation of EY as auditor, but measures to strengthen oversight and internal controls have been recommended.
Analysts at Lynx Equity Strategies wondered if the accounting problems that triggered the resignation of the company’s external auditors, EY, "management’s response to abrupt changes to the cash flow and balance sheet items may have had something to do with it".
Sales momentum is lighter than expected, Wedbush said, with sales of $5.9-6.0 billion for the fiscal first quarter, down from prior guidance of $6.0-7.0 billion, with guidance for second-quarter sales of $5.5-6.1 billion also below expectations.
Management emphasized delays linked to major customer Nvidia's Blackwell and issues with its regulatory filings as the primary catalyst behind the lighter sales.
This "fits with some of the feedback we have received from the supply chain, and would imply a sales rebound" in the next calendar year, Wedbush said.
Management also indicated the company is not giving guidance for the full year at this time, creating some uncertainty around the expected forward revenue trajectory.
Due to its lack of auditor, there is a question about whether Super Micro Computer can remain listed, said Wedbush.
Management stated that they are fully focused on finding an auditor and resolving the late filing status.
"However, we don't know how significant the hurdles might be in achieving this goal," the broker said, given that while the special committee seemingly found no larger issues, "EY's resignation points to SMCI's former auditors believing such issues existed and also that SMCI's special committee would not provide a resolution to any such problems".
However, SMCI can potentially receive up to a year in extensions from the NASDAQ to complete its late filings, though this timeline might still prove inadequate if larger issues need to be addressed, said Wedbush, as this isn't its first time, with Super Micro Computer shares being suspended in 2018/19 for failing to file its financial reports in a timely manner.
It might have a more difficult time obtaining extensions as the NASDAQ's literature indicates it will in part "consider the company's specific circumstances, including the company's past compliance history" when determining whether an extension is warranted, with SMCI needing to submit its plan for regaining compliance for an initial extension within 60 days of the NASDAQ's September 17 non-compliance letter.
Wedbush kept its 'neutral' rating and cut its target price to $24 from $32, having already lowered it from $62 on Monday.