Why Super Micro's stock tumbled to its worst day since August

By Emily Bary

Some were hopeful Super Micro would give a positive update ahead of its official results, but that didn't materialize when the company set its earnings date

Super Micro Computer Inc.'s stock recorded its worst day since August after the company announced an earnings date - but no early results to go with it.

The server maker stunned Wall Street last quarter when it preannounced results substantially higher than what analysts had been expecting. That was a coming-out party of sorts for Super Micro (SMCI), showing that the company is a clear beneficiary of frenzied spending on artificial-intelligence hardware.

Read: AMD's stock has been 'in absolute freefall' - but its earnings could spark a chip-sector rebound

Some were hopeful Super Micro would again give a positive update ahead of the official results, but that didn't materialize when the company put out a press release Friday morning setting its next reporting date for April 30.

"Expectations were they would positively preannounce like they did in January," Mizuho desk-based analyst Jordan Klein told MarketWatch. "And the fact that they did not raises questions about the strength of the quarter."

Super Micro shares fell 23.1% in Friday trading to see their largest single-day percentage decline since Aug. 9, 2023, when they fell 23.4%.

The stock is up 151% so far this year and is leading S&P 500 SPX gainers by a mile over that span. But given the recent price appreciation, "there is zero room for error," according to Klein.

"So now it becomes a waiting game until they report and can guide the next quarter," he continued. "But until they do that, hedge funds will short it and retail fast-money traders likely de-risk."

Klein added that he doesn't see much valuation support for the stock at these levels.

Loop Capital analyst Ananda Baruah, who upped his price target on the stock to $1,500 in a note to clients earlier this week, said in that report that he wouldn't be surprised to see an upbeat preannouncement. Super Micro had forecast $3.7 billion to $4.1 billion in revenue for the March quarter, but Baruah thought the company might end up posting at least $4.1 billion to $4.5 billion in revenue.

See also: This is Super Micro's path to $1,500, according to the stock's biggest bull

Other chip stocks were weak as well in Friday's action. Arm Holdings PLC shares (ARM) lost 17%, while Micron Technology Inc.'s stock (MU) dropped nearly 5%. Shares of Advanced Micro Devices Inc. (AMD) were down more than 5% and Nvidia Corp. (NVDA)'s stock fell 10%.

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-Emily Bary

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04-19-24 1733ET

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