Super Micro Computer's Stock Split: Potential Impact and Investor Outlook

Super Micro Computer Has Dropped 18%. Will It Soar After its Stock Split? | The Motley Fool

AI demand has helped Supermicro's revenue jump in the triple digits. Earlier this year, Super Micro Computer (SMCI 1.90%) proved itself as one of the powerhouses in today's economy. Thanks to demand from artificial intelligence (AI) customers for its equipment, the company delivered triple-digit revenue growth. Stock performance followed, with shares posting a first-half gain of 188%, even beating the gain of market darling Nvidia. And Supermicro scored invitations to join the S&P 500 and the Nasdaq 100, another sign of its earnings strength and market leadership. All of this sounds fantastic, but in recent weeks Supermicro has faced some headwinds that have translated into declines in the share price. The stock has lost about 18% since a short report in late August that alleged troubles at the company. On top of this, investors worried as Supermicro delayed its 10-K annual report. Now, moving forward, Supermicro has a big event right around the corner. The company will complete a 10-for-1 stock split at the end of the month, and the shares will start trading at their new split-adjusted price on Oct. 1. Will this once high-flying stock recover from recent woes and soar after the stock split? Let's find out. First, let's talk about Supermicro's path so far and what may lie ahead. The company isn't a new producer of workstations, servers, and other equipment. Supermicro actually has been around for more than 30 years, but growth only started taking off in recent times as the AI boom accelerated. AI customers have flocked to Supermicro for equipment as they build and expand their data centers. And Supermicro has been ready to serve them -- and with all of the latest technology from the AI chip market because this tech powerhouse works hand-in-hand with the biggest chip designers. So when Nvidia, for example, releases a new chip, it's immediately available in Supermicro's equipment. This has helped Supermicro grow five times faster than the industry average over the past year. It's also helped Supermicro's earnings take off. In the most recent quarter, revenue soared more than 140%, and profit climbed in the double digits. And this may be just the beginning as Supermicro gears up to address a new growing market: cooling solutions to tackle the heat problem in AI data centers. Supermicro predicts as much as 30% of new data centers will opt for direct liquid cooling within the coming 12 months and says it will dominate this market. At the same time, Supermicro is readying to open its Malaysia facility, one that will help it make gains in volume and lower costs in the coming years. As for the short report and Supermicro's delayed annual report, I don't see these issues as ones that change the bright long-term story: Supermicro called statements in the short report "false or inaccurate" and regarding its annual report says it doesn't expect any significant changes to earnings. Now, let's consider the upcoming stock split. These operations lower the price of each individual share, making the stock more accessible for a broader range of investors. But splits don't change anything fundamental about a company -- so valuation and the market value of the company remain the same, for example. This means a stock split, in and of itself, isn't a reason to buy a stock -- so the shares probably won't surge when they open at the split-adjusted price. Still, a split generally is a positive move for a company because, as mentioned, it makes it easier for more people to buy a particular stock. In this case, considering the current price of Supermicro and the ratio of the split, you'll be able to pick up a share for about $45 instead of more than $450. Progressively, this could attract more investors to the stock -- but only if they like the company's earnings track record and long-term prospects. Now, let's get back to our question. Will the stock soar after the split? I wouldn't expect that to happen overnight, since stock splits themselves don't act as catalysts for performance. But considering Supermicro's earnings strength so far and its potential to dominate in the DLC market, this top AI player has plenty of room to run over the long term.

What You Need to Know About Super Micro's 10-for-1 Stock Split

Server maker Super Micro Computer (SMCI) announced a 10-for-1 stock split last month that will take effect after the closing bell on Sept. 30. Shareholders will receive nine new Super Micro shares for every one they already own. Their overall stake in the company won't change, but the stock will subsequently trade for 10% of its previous price. In other words, if Super Micro shares were trading at $1,000 before the split, an investor holding one share before the split would hold 10 shares priced at $100 each after the split. (Companies can also hold reverse splits, as some have done lately.) Super Micro shares skyrocketed early in 2024 to a high of nearly $1,200 due to surging demand for artificial intelligence infrastructure. They traded closer to $600 when the split was announced, and closed Monday at about $465. The shares have lost more than half their value over the past six months, thanks in part to disappointing recent results. Even so, the stock is still roughly 65% higher year-to-date.

Watch These Super Micro Computer Stock Price Levels as Stock Split Looms

Investors should monitor key lower price levels on Super Micro Computer's chart around $357 and $230, while watching important higher price levels near $700 and $975. Super Micro Computer (SMCI) shares are likely to remain in focus this week after gaining more than 4% on Friday and ahead of the a stock split that takes effect next week. The stock is looking to build on momentum after losing around half its value over the past three months, in part due to disappointing fiscal fourth quarter results and accusations of "accounting manipulation" by short seller Hindenburg Research. The company's shares, which undergo a 10-for-1 stock split after the closing bell on Sept. 30, are still up about 60% since the start of the year amid expectations for booming artificial intelligence (AI) server demand to house chips that power the technology. Looking ahead, the company also stands to benefit from being a first mover in liquid cooling rack systems, according to the analysts at Needham, prompting the investment firm to initiate coverage of the stock last week with a "buy" rating and $600 price target, representing 31% upside from Friday's close of $457.27. Below, we take a closer look a Super Micro's chart and turn to technical analysis to identify crucial price levels to watch out for. Since setting their record high in early March, Super Micro Computer shares have oscillated within a descending broadening formation, with the stock's price tagging both trendlines on several occasions over the past six months to establish key support and resistance levels. Although the 50-day moving average (MA) crossed below the 200-day MA to form an ominous death cross earlier this month, buyers have recently defended the wedge's lower trendline. What's more, Friday's rally occurred on the highest trading volume in nearly two weeks, potentially setting the stage for further bullish price momentum. Looking ahead, investors should keep an eye on several important lower and higher price levels that stand out on Super Micro Computer's chart. Firstly, it's worth monitoring the $357 level. This area on the chart finds a confluence of support from a horizontal line joining the early August 2023 and January 2024 peaks with the broadening wedge's lower trendline. A failure to hold this level could see the shares revisit lower support around $230, a location where investors may look for buying opportunities near three troughs that formed on the chart between August and October last year. Upon a move higher, investors should monitor the $700 level, a region currently aligning with the 200-day MA where the shares may run into selling pressure near a trendline connecting a range of price action between February and early August. A breakout above this level and the wedge's upper trendline could fuel a rally to $975, an area where sellers may look to offload shares near the mid-April countertrend peak and three swing highs that formed on the chart in May, June, and July. The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.