Is this a buying opportunity for investors interested in the server systems specialist?
Shares of Super Micro Computer (SMCI -4.59%) fell 37.6% in August, according to data from S&P Global Market Intelligence. The server systems builder took two heavy hits last month, and shares are now trading 64% below the peak they reached in March.
Market-moving news
First, Supermicro reported its fiscal 2024 fourth-quarter results on Aug. 6. Earnings came up far short of both Wall Street’s consensus estimates and management’s guidance as Supermicro’s cost of sales grew faster than revenues. Soaring operating expenses also weighed on its net profits. Furthermore, earnings guidance for the next quarter came in below the average analyst’s projections.
Management also announced plans for a 10-for-1 stock split that day, but investors focused on the soft bottom-line result. The stock closed 20.1% lower the next day.
The second big drop came near the end of the month. A popular short-selling service posted a negative review of the company on the same day that Supermicro announced that the filing of its full-year 10-K report would be delayed. It’s hard to say which event hit the stock harder, but the overall effect was a single-session price drop of 19%.
Supermicro’s long-term shareholders are still doing great
The triple whammy of disappointing earnings, late financial filings, and a critical analyst report took the shine off Supermicro, but its long-term performance has still been impressive. There are 3,692 stocks on the U.S. market with at least five years of trading history. Supermicro leads the whole pack with a five-year compound annual growth rate of 95.1%.
So don’t cry for long-term Supermicro investors at this point — more recent trend chasers are the ones who have been left holding the bag.
Moreover, the stock looks reasonably affordable now, trading at 4.9 times trailing sales and 9.5 times forward earnings estimates. The artificial intelligence (AI) boom has created sustained high demand for powerful number-crunching computer systems, and Supermicro remains well positioned to exploit that trend. If you were keeping your hands off Supermicro’s soaring stock earlier this year, this steep price drop just might have created the buying opportunity you were looking for all along.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
