Not a stock I've seen talked about much lately, but I think its interesting.
It has a ton of issues (margin, investigations, AI ROI fears, stock offering) but its also trading very cheaply and has booming sales this year.
The bad:
Margins- Low margins, tough business, high COGS
Investigations- 2 countries now and I am unsure of the real risks here. Taiwan has to be more concerning but how much power do they have to cut SMCI business? I dont know.
Stock Offering- When it was announced the price absolutely cratered- down 25% in a day. Has to be largely priced in.
The good:
Margins! Recovered from 6.5% to over 9%. Materially better.
Price- Trading at 14 PE and 8 FWD PE. Like it or not, Data Centers are being built and SMCI has a huge place in this buildout.
Sentiment- Cant get much lower. Lots of distrust of management, uncertainty around regulation due to previous illegality, fear of cooked books (I think this is nonsense- real sales, but covered due to said illegality)
Neutral:
Technicals- There are multi year bottoms around this price. That said, they have been brutally punctured twice down to around $20, but have recovered both times in short order.
I personally think this is a buy here, I am purchasing small amount and have sold 2 $25 puts for 9/18 for 10% premium and 2 $20 puts for 11/20 for 13% premium.
My question is why are these regulatory headwinds so detrimental that they overpower the explosive growth that SMCI is experiencing atm? One look at the Dell chart shows you what COULD happen to the price of SMCI if regulatory winds clear and execution improves marginally. It is *possible* that SMCI multiple expands from 15 to 20(Dell trades at 31) while earnings triple and the stocks goes to 100 in relatively short order. I feel like there is a surprising amount of asymmetry here where the downside is like 20% and the upside is +300%.
Convince me I'm wrong.