George Tsilis is not entirely convinced that Super Micro Computer Inc (Nasdaq: SMCI) has a competitive advantage over its rivals.He’s the senior markets contributor at Schwab Network.Supermicro deals in liquid-cooled server technology that is “not necessarily unique … it has been around for quite some time.”In fact, the California based company is up against behemoths like HPE, Dell, and IBM – all of which may be better picks considering SMCI continues to wrestle with concerns surrounding its accounting practices and regulatory issues at large.Supermicro stock is down 10% on Friday.
Supermicro is losing customers
Super Micro Computer has more than doubled its sales versus last year that confirms the demand for its products is real.But the sustainability of its sales growth has come into question following a US probe into its accounting practices and alleged violation of export regulations related to China and Russia.Most recently, billionaire Elon Musk decided in favour of shifting from Supermicro to Dell for artificial intelligence servers he needs for xAI.Tsilis is dovish on SMCI also because its episode with Ernst & Young was fairly unique.“I don’t even think Enron or WorldCom’s accounting firms bailed on them. So, that’s a huge red flag,” he said in a recent interview.Supermicro shares are currently down more than 70% versus their high in March.
Why can’t SMCI be the next Autodesk?
On the flip side, the sharp sell-off may have positioned Supermicro stock for a solid comeback in 2025 as long as the accounting issues do not make it negatively revise its past earnings.That’s what happened with Autodesk.“The stock went down, valuations became very compelling, they didn’t restate any earnings, and the stock since then has been reiterated as a buy among multiple analysts and have moved higher,” Tsilis noted.Super Micro Computer has already named BDO its new independent auditor.However, what’s different in its case is that the management has withdrawn all guidance for earnings and sales – and without that transparency, analysts are not sure how to value SMCI shares, he added.
Is Supermicro stock worth investing?
All in all, the ongoing concerns suggest it’s unlikely that SMCI stock will succeed in climbing all the way back to its peak levels next year.Nonetheless, the company’s share price could orchestrate healthy returns in 2025 if the management reports financials and offers more colour on the outlook. Additionally, the short interest in Supermicro stock currently sits at over 17%. So, the possibility of a short squeeze remains on the table as well.Wall Street currently has a consensus “hold” rating on Super Micro Computer. Analysts see upside in its stock to $41 on average at writing.More By This Author:Is There Still Space For Disney+ To Thrive In Netflix’s World? This Under-The-Radar Restaurant Stock Has Outperformed Nvidia In 2024 How This European Automaker Is Minimizing The Impact Of Trump’s Tariffs
