CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:
We keep our price target at $16, 5.5x our FY 27 (Jun.) EPS view ($2.88), below SMCI's three-year average (~16x) given reputation risks and margin pressures. We lift our FY 26 EPS view by $0.35 to $2.58, lower FY 27's by $0.11 to $2.88, and initiate FY 28 at $2.92. We think SMCI's recent association with export control violations (BIS investigation still ongoing) could drive reduced demand, with Q3's 18% sales miss (attributed to customer fab readiness) worsening these fears. We also worry about access to suppliers (especially given memory shortages), and we point to SMCI's $10B Q/Q reduction in A/P (driving a $6.6B operating cash use) as a sign that customers are getting more cautious. Net debt now stands at $7.5B vs. $787M exiting Q2, and we suspect the BIS investigation is raising interest costs for SMCI that should start showing up on the bottom line. We think Q3's gross margin improvement (9.9%, +360 bps Q/Q) is largely mix-based (top customer 27% of sales vs. 63% in Q2) and not a structural improvement.