Super Micro slumps 20% on guidance cut; says recent probe shows no fraud evidence

Investing.com -- Super Micro Computer cut its guidance for the fiscal first and second quarter and the server equipment maker said an internal probe found no evidence of fraud from management or directors following concerns raised by its auditor.

Super Micro Computer Inc (NASDAQ:SMCI) shares fell more than 20% in premarket trading Wednesday, adding to its recent woes.

For fiscal Q1, the server equipment maker expects to report adjusted EPS of $0.75 to $0.76, compared with previous guidance range of $0.67 to $0.83. Revenue was expected in a range of $5.9B to $6.0B compared to its previous guidance range of $6.0B to $7.0B. That fell short of Wall Street estimates of $6.5B.

For fiscal Q2, the company expects net sales in a range of $5.5 billion to $6.1 billion and non-GAAP net income per diluted share of $0.56 to $0.65. This compares to the consensus of $6.9 billion and $0.83, respectively.

"Following a three-month investigation led by Independent Counsel, the Committee’s investigation to date has found that the Audit Committee has acted independently and that there is no evidence of fraud or misconduct on the part of management or the Board of Directors," the company said.

Last week, the company's auditor Ernst&Young resigned, citing governance, transparency, and internal control concerns. In August, the company was hit with a short seller report from Hindenburg Research, which alleged corporate maleficence, channel stuffing, related party transactions, selling products to bad actors like Russia, and shoddy workmanship.

The preliminary report from Super Micro is negative, with a "miss on sales, weak guidance, and the absence of formal SEC filings," analysts at Vital Knowledge said.

The company also forecast non-GAAP gross margin of approximately 13.3%, which may help de-risk the margin overhang on the stock somewhat.

Investors "may find solace in the gross margin upside...the increase in cash, and the somewhat encouraging board update," it added.

Also commenting on the report were Goldman Sachs (NYSE:GS) analysts. They note that SMCI's disappointing print and the lack of revenue guidance signals that "SMCI may potentially be seeing some business challenges." Still, the AI server maker continues to focus on manufacturing capacity expansion and stresses that Nvidia (NASDAQ:NVDA) GPU allocation is unchanged.

Meanwhile,   Barclays   (LON:BARC) analysts slashed their price target on SMCI shares from $42 to $25, citing the guidance cut and no timeline for when will the company file the 10-K as it continues to search for a new auditor.

"We expect the lack of clarity to put the stock under pressure near term with the rising risk of SMCI not meeting Nasdaq's listing requirements," analysts led by George Wang said.

Separately,   Mizuho   (NYSE:MFG) analysts suspended their rating and price target for SMCI following the results' release.