Market Minute: SMCI Business Update – Plenty to Prove!

Super Micro Computer (SMCI) is scheduled to provide a business update through a conference call at 5 p.m. ET on Tuesday, February 11^th. The A.I. server builder has not yet published its audited 10-K report for its last fiscal year or audited results for the 1Q of the current fiscal year so investors may not be getting audited 2Q results. It's possible that an end to the uncertainty surrounding the company's delayed 10-K report will arrive during the call. Its former auditor, Ernst & Young, resigned last October after flagging concerns about flaws in the company’s financial reporting controls. An internal investigation found no evidence of fraud, and Super Micro has since hired BDO as its new auditor. The stock of Super Micro surged 17% on Monday in anticipation of some clarity from the A.I. server builder. The Nasdaq has given Super Micro until Feb. 25 to submit that document or it faces the threat of being delisted from the exchange.

Super Micro’s stock has risen nearly 40% this year but is still down 39% from year ago levels as of Monday’s closing price. It’s also down 65% from its all-time high of $122 per share hit last March. It has rallied back above its 50-day Simple Moving Average and is up nearly 50% in February, so traders are optimistic the business update is going to be positive for the stock. The Relative Strength Index (RSI) is sitting at the 70 level as of Monday’s close, which is right at overbought levels on a technical basis.

The Option market is pricing in a +/- 20% ($8.55) move as of Monday’s close in the shares post the business update. Option Volume was heavy on Monday, with particular interest on the Feb. 14 Weekly 45 and 50 Calls, each with over 60,000 contracts traded. Call Volume was 812,000 during the session and more than doubled the Put Volume on the day.

Expectations are elevated going into the update and traders will focus on any change to its filings along with the health of its business and operational strategies.