Super Micro Computer is well positioned to capitalize on the boom in spending on data-center hardware to support artificial intelligence applications, a Wall Street analyst said Tuesday. SMCI stock rose after the bullish report.
Barclays analyst George Wang initiated coverage of SMCI stock with an overweight, or buy, rating and a price target of 327.
On the stock market today, SMCI stock climbed 1.4% to close at 247.74. Super Micro stock hit its all-time high of 357 on Aug. 7 ahead of its fiscal fourth-quarter results.
But SMCI stock crashed 23.4% on Aug. 9, the first trading session after its fiscal Q4 report. The San Jose, Calif.-based server maker beat Wall Street's sales and earnings targets for the quarter ended June 30, but disappointed with its sales guidance.
Super Micro Capacity Constraints
Super Micro is dealing with supply constraints, Wang said.
The company's current production capacity is 4,000 racks per month, which can support annual revenue of $12 billion to $15 billion. But Super Micro could double its global capacity once its Malaysian facility comes online in the second half of its current fiscal year. Once online, the company's production capacity could support up to $30 billion in revenue, Wang said.
"Against the backdrop of AI investment trends, we believe SMCI is well-positioned to capture the rising AI server opportunity," Wang said. He believes the company will gain market share thanks to its "superior design capability and strong AI partnerships."
Super Micro is working closely with leading AI processor maker Nvidia on its server systems.
"SMCI has 7% market share globally, implying further share gains ahead are likely," Wang said. He believes Super Micro is taking market share from Dell Technologies and Hewlett Packard Enterprise.
SMCI Stock Is In Consolidation Pattern
"Based on our Asia channel checks, we think SMCI's September-quarter guidance is very conservative," Wang said. "We expect a positive preannouncement around the third week of October, which we believe is the biggest near-term potential catalyst."
SMCI stock has been consolidating for the past seven weeks with a buy point of 357, according to IBD MarketSmith charts.
Further, SMCI stock is on the IBD Tech Leaders list.
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