With all the hypes about Supermicro ($SMCI), we did a quick study, spoke to several IT professionals in the server business and decided to take a short position on Friday morning. We could be totally wrong but consider these facts
- Spoke to 11 IT professionals: they said they are no different than a typical server companies like Dell ($DELL) or HP ($HPE)
- All the type is around AI server but other companies have similar products such as HPE ProLiant Gen11 server with NVIDIA’s ($NVDA) next gen GPU’s
- Their margin is getting squeezed so we don’t see a rosy future. Look at their last quarterly report presentation.
- -$595m cash flow from operations in Q2FY24
- Total cash: $726m, Total debt up by $229m, net cash $350m.
- Revenue mix: 4% in Q2FY23 was the sexy 5G, Telco & Edge/IOT and that became 1%. They are really into commoditized business
So what we are saying? Something doesn’t add up. A company in commoditized business, hemorrhaging cash, losing pricing power so making lower margins, hyping the future of the company on some AI server that other companies have, an unimpressive interview by the CEO…it doesn’t pass the smell test. Just like $GME. And what do we do when it reaches RSI of 98? We bought a bunch of puts.
Look at their interviews, quarterly reports and presentations, and talk to few folks in the IT/server business. And of course, do your own DD before making any investment decisions.
We expect the price to fall below $298 when the bubble bursts.