What’s Next For Super Micro Stock As Nasdaq 100 Index Exit Confirmed: Retail Bearishness Increases

Super Micro Computer, Inc. ($SMCI) shares are in the spotlight on Monday as the Nasdaq announced late Friday that the company will be removed from the prestigious Nasdaq 100 Index, which comprises 100 of the top non-financial tech companies.

The move is part of the index’s annual reconstitution and will become effective before the market opens on Monday, Dec. 23, 2024. 

Brief Stay

Super Micro was added to the Nasdaq 100 Index in late July amid the stock’s rally, which took it to a high of $122.90 on March 8. The rally was stoked by the artificial intelligence (AI) revolution, which was taking a firm grip and benefited Super Micro. The San Jose, California-based company manufactures AI servers and boasts customers like Nvidia Corp. ($NVDA). 

The red-hot rally cooled off, but the setback started in late August when the company announced a delay in filing its annual report for the fiscal year 2024 on Form 10-K, and short-seller Hindenburg said it found “fresh evidence of accounting manipulation.”

The weakness aggravated after Super Micro’s then-auditor Ernst & Young (EY) resigned in late October, citing concerns about accounting practices and internal controls. The company also delayed the filing of its September quarter report on Form 10-Q. 

The stock fell as low as $17.25 in mid-November, a far cry from the triple-digit levels it traded early in the year.  

Super Micro took remedial measures by appointing an independent committee to look into the concerns raised by EY, appointed BDO as its new auditor and also submitted a plan to the Nasdaq to avoid delisting from the exchange in the wake of the delays in the filing of the financial reports.

Later, the independent committee appointed by the board’s audit committee gave a clean chit to the company.

Stock Drop

Amid these developments, the company’s market capitalization fell from a peak of over $67 billion to a trough of $10.5 billion, before staging a modest recovery to $21.24 billion.

With Super Micro’s market capitalization among the lowest of the Nasdaq 100 companies and the lingering uncertainty about its ability to regain compliance, a Nasdaq 100 exit was speculated last week. After starting the week firmer, encouraged by the announcement that the Nasdaq granted an extension until Feb. 25, 2025, for filing the delayed financial reports, the stock fell in all four remaining sessions.

Super Micro shares ended Friday’s session down 3.90% to $36.45 and fell an incremental 6.45% to $34.10 in after-hours trading. A report regarding a potential private investment in public equity did little to assuage investor concerns on Friday. Citing people familiar with the matter,  Bloomberg said the company has tapped Evercore ISI to raise equity and debt capital.

Thanks to the front-end loaded gains for the year, the stock is still up over 28%. 

Look Ahead..

Super Micro stock trajectory in the near term hinges on the company meeting the late-February deadline for filing its annual and quarterly reports. 

A successful capital raise to shore up its finances could also be a near-term positive.

On the downside, the stock could find support around the $32-$33 area. Further down, it has support in the $29-$30 region. The stock faces resistance around its 50-day simple moving average around the $36.9 level.

Chart Courtesy of TradingView

On Stocktwits, sentiment toward the stock remained ‘bearish’ (40/100), with trader chatter also remaining subdued.

SMCI sentiment and message volume December 15, 2024, as of 10:44 pm ET | Source: Stocktwits

Retailers raised the possibility of the stock dropping to $28 this week.

Another Stocktwits user said news of a further dilution in capital and the Nasdaq-100 exit are not good signs. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.<