Shares of Super Micro Computer (NASDAQ: SMCI) fell 37.6% in August, in keeping with data from S&P Global Market Intelligence. The server systems builder took two heavy hits last month, and shares are actually trading 64% below the height they reached in March.
Market-moving news
First, Supermicro reported its fiscal 2024 fourth-quarter results on Aug. 6. Earnings got here up far in need of each Wall Street’s consensus estimates and management’s guidance as Supermicro’s cost of sales grew faster than revenues. Soaring operating expenses also weighed on its net profits. Moreover, earnings guidance for the following quarter got here in below the common analyst’s projections.
Management also announced plans for a 10-for-1 stock split that day, but investors focused on the soft bottom-line result. The stock closed 20.1% lower the following day.
The second big drop got here near the tip of the month. A preferred short-selling service posted a negative review of the corporate on the identical day that Supermicro announced that the filing of its full-year 10-K report could be delayed. It’s hard to say which event hit the stock harder, but the general effect was a single-session price drop of 19%.
Supermicro’s long-term shareholders are still doing great
The triple whammy of disappointing earnings, late financial filings, and a critical analyst report took the shine off Supermicro, but its long-term performance has still been impressive. There are 3,692 stocks on the U.S. market with at the least five years of trading history. Supermicro leads the entire pack with a five-year compound annual growth rate of 95.1%.
So don’t cry for long-term Supermicro investors at this point — newer trend chasers are those who’ve been left holding the bag.
Furthermore, the stock looks reasonably inexpensive now, trading at 4.9 times trailing sales and 9.5 times forward earnings estimates. The substitute intelligence (AI) boom has created sustained high demand for powerful number-crunching computer systems, and Supermicro stays well positioned to take advantage of that trend. If you happen to were keeping your hands off Supermicro’s soaring stock earlier this 12 months, this steep price drop just might need created the buying opportunity you were searching for all along.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Idiot has no position in any of the stocks mentioned. The Motley Idiot has a disclosure policy.
Super Micro Computer Stock Plunged 37.6% in August: Here’s Why was originally published by The Motley Idiot