Rosenblatt Securities Update on Super Micro Computer (NASDAQ:SMCI)

Rosenblatt Securities has suspended its rating, price target, and estimates for Super Micro Computer (SMCI) stock due to financial uncertainty following recent developments.

Key Events

• Ernst & Young Resignation: The AI server maker announced in an 8-K filing that Ernst & Young (EY) resigned as the company's registered public accounting firm last week.
• Stock Impact: SMCI shares plummeted over 32% on Wednesday after the news, with an additional loss of 5% in Thursday's premarket trading.

Reasons for EY's Resignation

EY's resignation was linked to issues regarding governance, transparency, and the completeness of communications from Super Micro. Concerns were raised about the internal control of financial reporting and the board's independence from CEO Charles Liang and management.

Next Steps

Super Micro is now seeking a new accounting firm and has indicated that it does not foresee a need to restate financials for fiscal year 2024 or previous periods. Despite the resignation, the company does not expect material changes to the fiscal quarter ending in June or the overall fiscal year.

Internal Review

The company formed a Special Committee to review internal controls, although management has disagreed with EY's resignation, stating that the review remains ongoing.

Analyst Commentary

Rosenblatt analyst Hans Mosesmann mentioned that due to the ongoing changes at EY, the firm may be distancing itself from riskier projects. Given the uncertainties regarding Super Micro’s financials, Rosenblatt has decided to suspend its ratings and estimates until more clarity is available.

Further information is expected during Super Micro's Q1 FY25 earnings call on November 5th.