Super Micro Computer Inc ( SMCI ) released a business update on Tuesday that included a positive note regarding its Special Committee investigation, but analysts are still hung up on the company’s new auditor search and the continued delay of SEC filings.

What To Know: Super Micro reported preliminary first-quarter financial results and issued soft guidance for the second quarter after the market close on Tuesday. The company also provided a business update related to the recent resignation of its independent auditor Ernst & Young (EY), who raised governance and transparency concerns.

Although Super Micro said the Special Committee's investigation found “no evidence of fraud or misconduct,” the company refrained from taking any questions related to EY's resignation on the call and didn’t address corporate governance issues. Super Micro also said it still doesn’t know when it will file its Form 10-K for the fiscal year ended June 30.

“We are downgrading shares of Super Micro to an Underweight rating from Neutral, due to several risk factors that introduce uncertainty around regulatory filings and business fundamentals,” JPMorgan analyst Samik Chatterjee said in a new note to clients.

JPMorgan slashed its price target from $50 to $23 for several reasons including a lack of transparency around the issues that led to EY’s resignation. Chatterjee also noted Super Micro provided limited commitments on leadership changes to address investor concerns surrounding accurate financial reporting and failed to provide clear timing on the appointment of a new auditor.

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JPMorgan also cited concerns around a potential air pocket in demand for Hopper-based server systems, inventory management, long-term gross margins and competition.

The sentiment out of JPMorgan was echoed by Needham analyst Quinn Bolton in a note to clients on Wednesday.

“A big question going into the call was whether management would provide updates on a new auditor and the filing of its 2024 10-K. Other than to say the company is actively searching for a new public accounting firm, management did not address these topics,” Bolton said.

The Needham analyst noted the Special Committee update was a positive, but said he still views the EY resignation as a “significant cause for concern.”

Needham has suspended its rating on Super Micro until the company files its 10-K with the SEC and finds a new auditor to clear up concerns.

SMCI Price Action: Super Micro shares were down 23.16% at $21.29 at the time of publication Wednesday, according to Benzinga Pro. The stock is now down nearly 75% over the past six months.