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As investors evaluate the trajectory of Super Micro Computer (SMCI), speculation abounds regarding the stock’s potential rise to the psychologically significant $1,000 mark. Recent market volatility, including a notable sell-off following the company's Q3 earnings report, have ignited both apprehension and optimism among market participants.
Despite the stock slump, Barclays has taken a bullish stance, suggesting that SMCI’s own revenue guidance for the current quarter may be conservative. With Barclays raising its price target to $1,000, the question emerges: Is Super Micro Computer stock poised for a significant rally? This analysis delves into the factors driving this debate and explores the potential next move for SMCI stock in the days ahead.
About Super Micro Computer Stock
Valued at $43.7 billion by market cap, Super Micro Computer is a California-based company that specializes in the development and manufacturing of high-performance server and storage solutions based on modular and open architecture. Its solutions include complete server and storage systems, modular blade servers, workstations, networking devices, server sub-systems, and accompanying management and security software.
Shares of Super Micro Computer have surged by 484.3% over the past 52 weeks, outperforming the broader S&P 500 Index’s ($SPX) 25.4% gain over the same period.
Recent News for SMCI Stock
On April 8, Super Micro Computer unveiled a new generation of IoT and embedded systems aimed at boosting performance and enhancing power efficiency for intelligent applications at the remote edge. With these new models, which include support for the new Intel Atom x7000RE processor, Super Micro expands its range of infrastructure solutions to provide enhanced computing and AI performance at the intelligent edge.
SMCI Sells Off After Earnings
After the close on April 30, Super Micro Computer reported its Q3 earnings results. Despite reporting stellar figures, investors were expecting more, leading to a single-day slump of about 14% in the stock on May 1.
Its total revenue of $3.85 billion surged approximately 200% year-over-year, driven by demand for its artificial intelligence (AI) servers, though it fell just short of Wall Street’s estimate for $3.90 billion. The company also reported an adjusted quarterly profit per share of $6.65, surpassing the consensus by $1.08.
“Strong demand for AI rack scale PnP solutions, along with our team’s ability to develop innovative DLC designs, enabled us to expand our market leadership in AI infrastructure,” said Charles Liang, President and CEO of Super Micro.
Turning to Super Micro’s guidance, the company anticipates earning $7.62 to $8.42 per share on revenue of $5.1 billion to $5.5 billion for the fourth quarter of fiscal year 2024, ending June 30. That's fairly robust compared to analysts' consensus estimates, which are projecting earnings per share of $7.57 on revenue of $4.86 billion.
Furthermore, Super Micro increased its revenue guidance for the full fiscal year 2024 to $14.7 billion-$15.1 billion from its previous outlook of $14.3 billion-$14.7 billion. Additionally, SMCI initiated full-year adjusted earnings per share guidance of $23.29 to $24.09. Analysts tracking Super Micro expect the company’s profit to surge 102.49% year-over-year to $21.99 in fiscal 2024. Moreover, Wall Street anticipates that SMCI’s FY24 revenue will rise to $14.93 billion, indicating a 109.52% year-over-year increase.
However, Barclays analyst George Wang seems to think that the company’s fourth-quarter outlook might be too conservative, suggesting that the company could achieve $6 billion in revenue in the current quarter.
“Additionally, the Sep-Q should grow by 5% Q/Q with a much bigger sequential ramp for Dec-Q, aided by incremental order wins from sovereign AI and some green shoots around share gains for leading hyperscale customers,” the analyst said in a research note. Based on this, Barclays raised the firm’s price target on SMCI stock to $1,000 from $961, and kept an “Overweight” rating on the stock.
Meanwhile, Wedbush raised the firm’s price target on the stock to $800 from $530, suggesting sales momentum is only accelerating into Q4.
The Business Outlook For Super Micro Computer
SMCI’s long-term prospects look favorable, largely propelled by the rapid surge in demand for AI chips and AI-optimized servers. With industry experts, including the CEOs of Taiwan Semi (TSM), Nvidia (NVDA), and AMD (AMD), forecasting a tenfold increase in the AI chip market over the next three to five years, SMCI is well-positioned to capitalize on this rapid growth.
Furthermore, the company’s partnerships with prominent AI chip manufacturers, such as Nvidia and AMD, are expected to drive increased demand for Super Micro’s complementary AI server systems.
Is SMCI Stock a Good Buy Right Now?
Assessing Super Micro’s valuation, the stock presently trades at roughly 33x consensus 2024 earnings, surpassing the sector’s median of 23.44x, and also exceeding the respective multiples of its direct peers Hewlett Packard Enterprise Company (HPE) at 8.97x and Dell Technologies Inc. (DELL) at 16.52x.
Nevertheless, SMCI’s anticipated growth in both revenue and earnings outshines that of its peers, suggesting this multiple is more than justified.
Options Market Sentiment on Super Micro Stock
Looking at the May 17, 2024, option chain for SMCI, let’s figure out options market sentiment by comparing the open interest levels.
At the $780.00 strike price, which is the closest to the current share price, the put-call ratio sits at 0.48. This reveals a heightened preference for call options, and potentially signals an anticipated uptick in the stock price.
What Do Analysts Expect For SMCI Stock?
Super Micro Computer stock has a consensus “Moderate Buy” rating. Out of the 13 analysts covering SMCI stock, eight recommend a “Strong Buy,” four recommend a “Hold,” and one gives a “Strong Sell” rating.
The mean target price for SMCI stock is $974.00, which is 24.4% above Friday’s closing price.
The Bottom Line on SMCI Right Now
I believe SMCI stock presents an excellent buying opportunity at current levels, supported by the company’s robust financial performance, anticipated growth trajectory, positive sentiment in the options market, and the overall bullish outlook maintained by most analysts. Furthermore, the recent pullback offers an opportunity to purchase the stock with a better risk/reward ratio.
With the long-term prospects for generative AI still robust, Super Micro Computer stock could reach the $1,000 mark in the foreseeable future.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
