Super Micro Faces Cautious Analyst View Amid Shifting Customer Demand And Declining Margins

Super Micro Computer SMCI stock declined Wednesday after the company lowered its preliminary guidance on Tuesday.

Wall Street analysts slashed their price targets on the stock.

JP Morgan analyst Samik Chatterjee maintained a Neutral rating on the stock on Tuesday.

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The company now expects to report third-quarter revenue of $4.5 billion to $4.6 billion, down from prior guidance of $5 billion to $6 billion.

Super Micro also expects third-quarter adjusted EPS of $0.29-$0.3, down from previous guidance of $0.46-$0.62.

Super Micro further noted that the adjusted gross margin for the third quarter was 220 basis points lower than that of the second quarter, primarily due to higher inventory reserves resulting from older-generation products and expedited costs to enable a faster time-to-market for new products.

Chatterjee updated his model based on the company’s new guidance for the fiscal third quarter.

He does not expect the magnitude of the revenue miss, relative to prior guidance, to be representative of any industry-wide demand slowdown or related to any supply headwind. It was more driven by specific customer decisions on platforms that shifted in relation to timing.

Given the limited visibility around Super Micro’s opportunity to catch up to the revenue push-out in the next quarter, Chatterjee cautiously moderated his fiscal fourth-quarter expectations.

As it relates to gross margin headwinds, beyond the already outlined challenges for Super Micro to manage through a tough competitive market for Blackwell-based products, in Chatterjee’s view, the margin issues with Hopper-based products will be short-lived, and the inventory write-down impact will be temporary.

The outcome for the fiscal third quarter does not help the company reinforce its credibility with investors on guidance practices, and investors will increasingly scrutinize guidance around aggressive revenue and margin ramps for future quarters.

Chatterjee projected third-quarter revenue of $4.55 billion and adjusted EPS of $0.30.

Price Action: SMCI stock is down 15.43% at $30.48 at last check Wednesday.

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