(Bloomberg) — A roller-coaster ride for Super Micro Computer Inc. shares is more likely to proceed for a while, as investors weigh the corporate’s next steps to avoid being delisted by Nasdaq Inc.
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The server maker soared almost 60% this week after it hired BDO USA as its independent auditor and filed a plan to comply with Nasdaq listing requirements. It’s the most recent twist in a saga that saw the once-hot stock hit a record high in March before seeing those gains evaporate amid allegations of accounting and governance issues and filing delays.
The corporate this week said that it believes it will possibly file its delayed 10-K and 10-Q reports within the period available under Nasdaq rules. If Super Micro’s proposal is accepted, it could likely get until mid-February to file. That sets up months of further uncertainty — leaving investors to choose whether to keep on with the stock in hope of a recovery, or bail out.
“I actually think it’s just an entire coin toss at once,” said Larry Tentarelli, chief technical strategist at Blue Chip Every day. Tentarelli said he previously held shares of Super Micro but sold near the top of July when the stock was within the $80 range.
Representatives for Super Micro and Nasdaq didn’t immediately reply to Bloomberg News requests for comment.
The San Jose, California-based firm delayed filing its annual 10-K, following a dangerous report earlier this yr from short seller Hindenburg Research, and has said it could be late with quarterly reports.
The firm’s previous auditor, Ernst & Young LLP, resigned in October, citing concerns over the corporate’s transparency and governance. Super Micro can also be facing a US Department of Justice probe.
Bloomberg Intelligence analyst Woo Jin Ho is reserving judgment on whether Super Micro can recuperate.
“The filing extension gives the corporate until late February to file the documents, yet the delisting overhang appears more likely to persist until it’s compliant,” he wrote. “Given the challenges that Ernst and Young noted working with Super Micro’s board, it’s unclear if BDO will face similar issues.”
Nasdaq must now review and approve the corporate’s plan, a process that is predicted to take about two weeks. If the exchange doesn’t accept the proposal, Super Micro can appeal the choice. Shares will remain listed within the meantime.
Others on Wall Street are more bullish, seeing Super Micro as too vital to be delisted and booted from the S&P 500 Index. The corporate won inclusion within the benchmark gauge in March, further juicing its staggering returns to that time.
With the opportunity of a delisting now reduced, “we expect the stock to make a run for our price goal within the near-term,” said Lynx Equity Strategies analyst KC Rajkumar, who has a goal of $45, implying greater than 50% upside from Thursday’s close.
Still, several other analysts aren’t willing to make a call, with a minimum of seven firms suspending coverage on the stock for the reason that end of October, when previous auditor Ernst & Young LLP resigned, based on data compiled by Bloomberg.
While weighing up Super Micro’s prospects, investors even have their eye on competitors. The corporate’s woes may very well be a possible boon to rival server makers including Dell Technologies Inc., Lenovo Group Ltd. Wiwynn Corp., Hon Hai Precision Industry Co. and Pegatron Corp., based on Bloomberg Intelligence. Dell shares have risen in November while Super Micro slumped.
On the flip side, with the opportunity of a Super Micro delisting now reduced, hardware peers reminiscent of Dell may “stand in peril of a stock fade,” Lynx analyst Rajkumar wrote.
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