AI predicts when SMCI stock will recover after the accounting debacle

The stock price of Super Micro Computer Inc. (NASDAQ: SMCI) is witnessing a significant sell-off as investors turn bearish on the company following its recent accounting woes.

In summary, SMCI came under scrutiny after its auditor, Ernst & Young, resigned, citing issues with governance, transparency, internal controls and concerns about management independence.

As a result, the stock has profits wiped out of the company’s business in artificial intelligence (AI). At the end of the last trading session, SMCI was valued at $26.05, down over 10% for the day. In the past week, the stock is down 45%; year to date, SMCI is down 8.7%.

From a technical perspective, SMCI stock is showing worrying signs on the five-year weekly chart, suggesting a challenging period ahead.

According to one analysis shared by market analysts under the pseudonym Brettrecent price movement has pushed the SMCI below the crucial 50-week moving average, signaling a near-term downward correction.

The stock has seen remarkable price appreciation over the past five years, but appears to be losing momentum. Overall, investor interest in the company is waning after the stock consistently failed to stay above key support levels.

AI’s take on SMCI’s recovery path

With SMCI stock seemingly in freefall, attention has turned to the potential for recovery amid the accounting debacle. To this end, Finbold consulted OpenAI’s ChatGPT-4o for insights.

According to ChatGPT-4o, several factors can influence a recovery. Optimism may arise if management hires a new auditor, addresses internal controls and provides financial transparency. Market reaction, institutional interest, short-term selling pressure and broader market sentiment will also be critical.

If these factors align, ChatGPT-4o expects a recovery in early 2025. However, if internal problems persist, the stock could continue to decline until the end of 2025.

Analysts are taking over SMCI stock

Mizuho Securities analyst Vijay Rakesh supports the possible recovery. The analyst reiterated a ‘Hold’ rating with a $45 price target despite Ernst & Young’s resignation.

However, Rakesh noted that the stock is at increased risk of delisting, especially after Nasdaq issued a non-compliance warning to the company.

SMCI management currently has the opportunity to correct these issues. It has until November 16 to present a plan to file a 10-K report and secure a new, credible auditor.

If the AI ​​hardware manufacturer does not meet this requirement, it risks deregistration from the stock exchange. SMCI has until the end of February 2025 to file its 10-K and return to compliance, which could be a bullish move that boosts investor confidence if it meets Nasdaq’s compliance.

At the same time, Rosenblatt Securities suspended its rating and price target for SMCI. The analysts are waiting for clarity on the troubled company’s financial reporting and management practices.

Notably, SMCI’s troubles started in August after Hindenburg Research accused the company of “accounting manipulation,” leading to a near-term stock correction.

Impact on SMCI’s earnings report

The stock’s potential recovery will also depend heavily on its upcoming earnings report scheduled for November 5. If the company beats analyst estimates and issues strong guidance, it could be a positive sign before the accounting issues are fully resolved.

For the first quarter of 2025, SMCI is expected to post earnings of $0.75 per share, representing 120.6% year-over-year growth. Meanwhile, revenue is expected to reach $6.52 billion, up 207.5% from the same quarter last year.

In summary, with SMCI proving weak, investors may want to remain cautious and keep an eye on how the tech company resolves its accounting issues.