Super Micro Computer's Stock Soars: A Look at the Company's Future Prospects

Where Will Supermicro Stock Be in 5 Years? | The Motley Fool

Rapid growth and the demand for AI servers bode well for the company. Looking back on Super Micro Computer (SMCI -4.50%) five years ago, few likely envisioned it would reach the heights it has today. It has existed since 1993 and has traded as a stock since 2007. Despite building a large, successful business, the company was largely unknown outside its industry and drew little interest from stock investors. Supermicro's fortunes changed dramatically when its partnership with Nvidia brought about exponentially higher sales of AI-capable servers. This helped lead to the AI stock rising by over 3,500% over the last five years. Admittedly, another 3,500% increase in the next five years is unlikely, but the stock can probably generate market-beating returns during that time. Here's why. The most surprising things about Supermicro are its longtime obscurity and meteoric rise to prominence. The company describes itself as a "rack-scale total IT solutions provider" that creates environmentally friendly and energy-saving machinery. It produces first-to-market hardware for the edge, 5G, data centers, the cloud, and AI in approximately 6 million square feet of manufacturing space. Moreover, it operates in more than 100 countries, meaning it built an extensive footprint despite receiving little attention from investors until recently. The company's growth has now become too significant for investors to ignore. In the first nine months of fiscal 2024 (ended March 31), it reported $9.6 billion in revenue, a 95% yearly increase. With that, net income surged to $855 million compared with $446 million in the same year-ago period. Additionally, its rapid growth is on track to continue. Markets.us estimates the compound annual growth rate (CAGR) for the AI server industry will exceed 30% through 2033. Fortunately for Supermicro's shareholders, company estimates far exceed that rapidly growing industry CAGR. In the most recent earnings report, the company raised its fiscal 2024 revenue guidance to $14.7 billion, which would mean a 107% growth rate if revenue levels match the company estimate. As for the stock, it has risen by almost 130% over the last year. Still, nearly all of that growth occurred in the first three months of the calendar year, and the stock has pulled back by more than 40% since peaking in March. However, that price correction could dramatically increase Supermicro's odds of outperforming the indexes. Its P/E ratio had reached 90 as its stock peaked. Now, with rising profits and falling stock prices, the earnings multiple has dropped to 39. Its PEG ratio of just 0.6 confirms that its P/E ratio is at a very low level, considering the rapid growth of its profits. Furthermore, analysts forecast that Supermicro's net income will grow by an average of 62% per year for the next five years. Admittedly, this is a "way too early" estimate and will likely change significantly as more information becomes known. Still, if profits grow at an average close to this estimate, it is likely the rapid growth of Supermicro stock will continue. Although a lot can happen in five years, Supermicro stands a high likelihood of beating the market over that time. As stated before, investors should not expect another 3,500% gain over five years, nor should they expect the company to maintain revenue growth near the triple-digits over the long run. Nonetheless, the AI servers produced by Supermicro are experiencing unprecedented demand, leading to massive gains in the stock price. Moreover, even if estimates for the future change significantly, both Supermicro and its industry should experience rapid growth rates for years to come. Additionally, considering the growth rates of the recent past, the 39 P/E ratio and the PEG ratio under 1 arguably make Supermicro a bargain stock. Given its recent pullback, now might be a good time to add shares.

Super Micro Computer Stock Is Surging Wednesday: What's Going On? - Super Micro Computer (NASDAQ:SMCI)

Super Micro is scheduled to report financial results for its fiscal fourth quarter after the market close on Aug. 6. Super Micro Computer Inc SMCI shares are trading higher Wednesday in sympathy with Advanced Micro Devices, Inc. AMD, which popped after reporting strong financial results for the second quarter. What Happened With AMD: AMD reported second-quarter revenue of $5.835 billion, beating analyst estimates of $5.724 billion. The chipmaker reported adjusted earnings of 69 cents per share, beating analyst estimates of 68 cents per share. "We delivered strong revenue and earnings growth in the second quarter driven by record Data Center segment revenue. Our AI business continued accelerating and we are well positioned to deliver strong revenue growth in the second half of the year led by demand for Instinct, EPYC and Ryzen processors," said Lisa Su, chair and CEO of AMD. "The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business." AMD said it expects third-quarter revenue to be between $6.4 billion and $7 billion versus estimates of $6.61 billion. The company anticipates third-quarter gross margin of approximately 53.5%. AMD also said on its conference call that it expects GPU revenue to exceed $4.5 billion this year, up from its prior forecast of approximately $4 billion. AMD shares were up approximately 8% at the time of writing. Check This Out: US Private Employment Rises By 122,000 In July, Misses Estimates: 'If Inflation Goes Back Up, It Won't Be Because Of Labor' Why It Matters: Several semiconductor names are moving higher alongside AMD as investors become more optimistic about chip earnings. Super Micro is scheduled to report financial results for its fiscal fourth quarter after the market close on Aug. 6. The company is expected to report earnings of $8.10 per share and quarterly revenue of $5.294 billion, according to estimates from Benzinga Pro. Super Micro has beat revenue estimates in three of the past four quarters. The company has also delivered an upside earnings surprise in four consecutive quarters heading into next week's print. What Else: Some chip stocks may also be getting a lift after Reuters reported that the Biden administration plans to propose a new rule next month that would expand the United States' ability to stop foreign exports of semiconductor manufacturing equipment to Chinese chipmakers. The report indicates that shipments from allies that export key chipmaking equipment, including Japan, the Netherlands and South Korea, will be excluded from the new rule, limiting its impact, according to sources familiar with the matter. SMCI Price Action: Super Micro shares were up 5.57% at $703.45 at the time of publication, according to Benzinga Pro. Read Next: AMD Partners With Microsoft, Meta, And Google On New AI Accelerator Link Standard To Challenge Nvidia's Dominance Photo: Shutterstock. Market News and Data brought to you by Benzinga APIs