Super Micro Computer Inc. shares surged 16% in early premarket trading on Wednesday after the company said its June-quarter gross margin would come in well above its previous forecast, driven by new orders worth over $60 billion.
While sentiment on Stocktwits swung to ‘bullish’ from ‘bearish’ following the update, many traders remained skeptical, taking the company’s announcement with a pinch of salt.
The AI server firm's gross margins in the fourth quarter will be around twice as high as previously forecast. They would be in the range of 15% to 17%, up from its previous guidance for 8.2% to 8.4%, largely due to a favorable customer and product mix, the company said.
Super Micro said it expects fourth-quarter revenue to land at the low end of its previously guided $11 billion to $12.5 billion range. However, it disclosed new orders worth more than $60 billion bagged during the quarter, leaving it with a record backlog heading into the new fiscal year.
Super Micro was embroiled in a controversy wherein one of its co-founders and certain staff were charged in March with illegally smuggling AI servers with certain Nvidia chips to Chinese customers in violation of export rules.
While the company has distanced itself from the issue, concerns have persisted. “High profile customers don't order 60bn dollars worth of product in 3 months from ‘scam companies.’ Just cover and shut up,” a user posted on the SMCI stream on Stocktwits.
Another wrote: “The company's PR team has stepped up its game. This pre-announcement caught the shorts off guard. If you follow the biweekly short interest data, you'll see that short sellers added more than 25 million shares in June.”
Traders appeared to be looking for more concrete disclosures – such as the identities of a few new customers – before taking the announcement at face value. The skepticism is also reflected in the stock’s elevated short interest, which has climbed sharply this month to about 16%, near a record high.
“$SMCI I think we are going to see that long-awaited squeeze. Shorts have been dragging down this stock hoping eventually holders would get worried going into earnings a miss was coming and it would feed downward pressure,” a trader said.
SMCI was the number one trending ticker at the time of writing. The stock is already down 13% year to date.
Super Micro is scheduled to report its earnings on Aug. 11. Analysts expect the company to report fourth-quarter EPS of $0.70, up nearly 71% from a year-ago period, and revenue to more than double to $11.73 billion, according to estimates from Fiscal.ai.
Despite the strong growth outlook, Wall Street’s consensus on SMCI remains cautious, with an overall ‘Hold’ rating. Eleven out of the 19 analysts rate it ‘Hold,’ while five recommend ‘Buy’ or ‘Strong Buy.’ Of the remaining three, two rate it ‘Sell’ and one rates it ‘Strong Sell.’ The average price target of $37.38 implies a nearly 57% upside from Tuesday's close.
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