How to play SMCI stock after disappointing Q3 earnings?

G Squared’s chief investment officer Victoria Greene says investing in Super Micro Computer Inc (NASDAQ: SMCI) on the post-earnings decline is like “catching a falling knife.”

Earlier this week, the AI server company reported 30 cents a share of earnings for its fiscal third quarter, sharply below expectations of 54 cents.

SMCI’s preliminary revenue for the third quarter also missed consensus by about a billion-dollar. Versus its year-to-date high, Supermicro stock is down nearly 50% at writing.

SMCI stock could crash to $18 in 2025

According to Victoria Greene, just because SMCI shares are already down significantly doesn’t mean “you can’t go down further.”

In fact, new chip restrictions under the Trump administration and a potential slowdown in corporate spending on artificial intelligence could push Supermicro stock down further to $18 in the coming months, she added.

Note that the AI company saw its gross margin contract by 220 basis points in the third quarter as well, prompting Greene to argue “this stock is not worth the risk here.”

SMCI stock does not currently pay a dividend to incentivize sticking with it through turbulent times either.

Mizuho trims estimates for Supermicro shares

Super Micro Computer’s earnings release suggests it generated about $4.55 billion in revenue in its fiscal Q3, which translates to a year-over-year growth rate of about 18% only.

That’s down alarmingly from as much as 200% annualised growth that the company has reported in the past.

SMCI’s devastating preliminary report for the third quarter made Mizuho analyst Vijay Rakesh cut his price objective on the AI stock to $34 as well.

Rakesh attributed much of the weakness in Supermicro’s Q3 financials to it losing share to the likes of Dell Technologies.

Plus, the DOJ overhang warrants caution in buying SMCI shares as well, he added.

Investors should note, however, that Mizuho’s new price target on Super Micro Computer Inc still represents about a 7% upside from current levels.

Is it worth buying SMCI at current levels?

SMCI stock is being punished this week also because its disappointing Q3 update follows pompous remarks from its chief executive, Charles Liang, who in February said, “the calendar year 2025 growth could be a repeat of calendar year 2023.”

In 2023, Super Micro Computer increased its revenue at an annualised rate of more than 37%.

According to the Nasdaq listed firm, much of the weakness in its third quarter was related to “delayed customer platform decisions” and higher inventory for older generation products.

Still, Supermicro is evidently grappling with a lot of headwinds at writing to inspire confidence in building a position in its stock.

What’s also worth mentioning here is that the consensus rating on this AI stock also currently sits at “hold” only.