- SMCI stock continued falling as the Justice Department opened a probe into Alice Huang.
- The department is assessing whether her companies took part in smuggling Supermicro’s products to China.
- Supermicro is one of the top bargains, trading with a forward P/E ratio of less than 5.
Super Micro Computer extended its steep decline and is now trading near its lowest level since July 29, after US authorities opened an investigation into Alice Huang over potential shipments of the company’s products to China. SMCI stock fell to $25.50, nearly 50% below its yearly high.
Justice Department is Investigating Alice Huang
The US Justice Department is investigating whether entities tied to Alice Huang were involved in the smuggling of Super Micro Computer’s products to China. According to Bloomberg, the investigation is being led by the U.S. Attorney’s Office in Manhattan.
Super Micro Computer has been at the center of an investigation in the US and Asia, with authorities probing its shipments of Nvidia chips to China. US authorities sued SMCI’s founder and other people in relation to these shipments, which explains why SMCI has underperformed other companies like Dell and HP Enterprise.
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There is also a possibility that the company’s shipments to Asia will come under scrutiny from US officials, a move that will impact its operations. Its last earnings report showed that its revenue rose to $11.1 billion, up sharply from the $5.01 billion it made in the same period last year. Its profit soared to $1.5 billion from $168 million in the same period last year.
On the positive side, the company is one of the most undervalued companies on Wall Street, with its forward price-to-earnings ratio being 4.67, much lower than the technology sector median of 20.3. The multiple is lower than its five-year average of 16.27.
The same is true with its forward price-to-earnings-to-growth ratio (PEG), which stands at 0.02, much lower than the sector median of 0.52. This cheap valuation is because investors remain concerned about the AI bubble and its Chinese business.
SMCI Stock Price Technical Analysis
Super Micro Computer stock chart | Source: TradingView
The daily chart shows that the Supermicro stock has been in a strong sell-off in the past few months. It has slumped from a high of $45.79 in September to a low of $25.6.
The stock has dropped below the 61.8% Fibonacci Retracement level. It has slumped below all moving averages. Also, it has dropped below the Supertrend indicator.
Therefore, the stock will likely continue falling, potentially to the psychological level of $20, which is about 25% below the current level. On the other hand, a move above the resistance level of $30 will invalidate the bearish outlook.
What is your outlook on Super Micro Computer, Inc.?
Anonymous · no sign-up · results from the last 30 days · not investment advice