Super Micro Computer (SMCI 0.60%) stock has taken investors on a wild ride over the last year. The company's share price rocketed higher in conjunction with soaring demand for its high-performance rack servers for artificial intelligence (AI), hitting a split-adjusted stock price of $118.81 in March of last year. But the good times didn't last.
Along with some potential performance red flags in its earnings reports, Supermicro stock saw dramatic valuation pullbacks as concerns were raised about accounting practices at the company. The day after now-defunct short-selling firm Hindenburg Research published bearish coverage on the stock and alleged repeated accounting violations, the AI hardware specialist announced it was delaying its annual 10-K report. Then, Ernst & Young stepped down as the company's financial auditor in October.
Supermicro has since hired BDO to handle its auditing and has said that it will finally file its delayed 10-K report by Feb. 25. But the company's share price is now down 71.5% from its high.
If Supermicro's official filing for its last fiscal year arrives without any big changes to business results the company has already reported, its share price could soar in the near term. But there's a fundamental long-term catalyst investors should also be keeping an eye on.
Gross margin performance will be key for Supermicro in 2025
Even before the company's accounting issues kicked off big sell-offs for its stock, Supermicro had started to see a valuation pullback in conjunction with concerns about its gross margins. Take a look at the chart, which tracks the company's quarterly gross margin up to the end of its 2024 fiscal year -- which wrapped June 30.
SMCI Gross Profit Margin (Quarterly) data by YCharts
Due to its accounting issues, Supermicro did not publish official results for the first quarter of its current fiscal year. But the company did publish unaudited preliminary results for the period and said that it expected to report a gross margin of roughly 13.3% for the period. Supermicro stock looks risky, but it could rebound if gross margins tick up with this year's earnings reports.
