Super Micro Computer (SMCI) Stock: Analysts Debate $1,000 Target

Is Super Micro (SMCI) a $1,000 stock? Wall Street analyst discusses By Investing.com

A Loop Capital analyst adjusted their price target for Super Micro Computer Inc (NASDAQ:SMCI) stock on Monday, reducing it from $1,500 to $1,000, citing the AI server maker's efforts to restore its gross margin (GM) and operating margin (OM) to 14% and 10%, respectively, as well as the investors' concerns regarding the company's delayed 10-K filing. Still, the analyst believes that the recent speculation of SMCI's possible demise "is greatly exaggerated and that its importance to the Gen AI server conversation is underappreciated." Super Micro in August said it is delaying its annual report filing, citing the need to evaluate "its internal controls over financial reporting," leading to a sharp drop in the company's shares. The stock lost nearly 20% in the past month. The delay followed a day after short-seller Hindenburg Research revealed it had taken a short position in the company, accusing Super Micro of "accounting manipulation." Since reaching a high in mid-March, SMCI shares have been steadily declining, losing nearly two-thirds of their value after a surge driven by the AI boom. It remains unclear if the company's decision was linked to Hindenburg's report. The company also did not revise its previously reported results for the fiscal year and quarter ending June 30. Last month, Super Micro posted a drop in quarterly margins due to rising server production costs and increased competition from rivals such as Dell (NYSE:DELL). The company had been a major beneficiary of the generative AI surge, as businesses invested in technology to support applications like ChatGPT. SMCI valuation soared from around $4.4 billion at the start of 2023 to a peak of $67 billion in March. However, the rapid rise of AI stocks has slowed since March, as investors have come to realize that the return on companies' heavy investments may take longer than anticipated. Super Micro's delay in filing its 10-K has prompted several downgrades and price target reductions from Wall Street analysts in recent weeks, further dampening investor sentiment around the stock. Despite recent headwinds and a price target reduction from $1,500 to $1,000, an analyst at Loop Capital believes it's not all doom and gloom for Super Micro. According to the analyst, SMCI has the potential to achieve over $40 billion in normalized revenue. Conversations with customers indicate a feasible path to returning to a GM of over 14% and an OM of over 10%, with the help of NVIDIA Corporation's (NASDAQ:NVDA) upcoming next-gen GPU architecture, Blackwell. The firm believes that with such revenue growth and margin profiles, SMCI could command a price-to-earnings (P/E) ratio of at least 20 times, justifying normalized earnings per share (EPS) of $50.00. Loop Capital also presented several "What If" scenarios regarding SMCI's future performance. These included the possibility of SMCI maintaining its revenue upside for the fiscal 2025 year at $30 billion and regaining GM and OM targets in the next four quarters. The analysis highlights SMCI's continued preference as the original equipment manufacturer (OEM) through the Blackwell cycle, which is expected to extend through most of the calendar year 2026. The analyst also discussed the competitive landscape, noting that while other Gen AI server vendors are entering the market, they do not "offer the same high-margin services as does SMCI (such as rack integration and tuning)... and the ODM's look at 3rd-Parties for this capability doesn't fit the bill." "As such, customers currently see paying SMCI an additional GM of 200 - 300bps as the likely outcome for Blackwell, moving GM back to the 14%+ range," they added. Regarding the 10-K filing delay, the analyst sees it as a minor hurdle and potentially reflective of a company experiencing rapid growth and focusing on execution.

Loop Capital cuts Super Micro stock target, retains buy rating By Investing.com

On Monday, Loop Capital adjusted its financial outlook for Super Micro Computer (NASDAQ:SMCI) shares, a company listed on NASDAQ:SMCI, reducing the price target to $1,000 from the previous $1,500. Despite this change, the firm maintained its buy rating on the stock. The decision to lower the price target comes as Super Micro Computer navigates challenges to restore its gross margin (GM) and operating margin (OM) to 14% and 10%, respectively, and resolves issues related to its 10-K filing. The analyst from Loop Capital expressed confidence in Super Micro Computer's future, noting that the concerns about the company's potential downfall are overstated. According to the analyst, the market is not fully recognizing the company's significant role in the generation artificial intelligence (Gen AI) server market. Super Micro Computer is currently addressing its financial reporting processes, specifically focusing on the 10-K filing. The 10-K is an annual report filed by publicly traded companies to the U.S. Securities and Exchange Commission, providing a comprehensive summary of financial performance. The issues with the 10-K have been a factor in the revised price target. The firm's maintained buy rating indicates a belief that Super Micro Computer's stock retains its investment appeal. The analyst suggests that the company's involvement in the Gen AI server sector is undervalued by the market, implying potential for growth despite the current obstacles. Investors and market watchers will be monitoring Super Micro Computer's progress in improving its margins and resolving its 10-K situation, as these factors are likely to influence the stock's performance and Loop Capital's assessment moving forward. In other recent news, Supermicro has launched its high-density FlexTwin servers, designed for demanding High-Performance Computing (HPC) workloads. The servers feature Direct Liquid Cooling (DLC) technology and can accommodate up to 96 dual processor compute nodes in a 48U rack. The company has also previewed its new X14 server platforms, built on the upcoming Intel (NASDAQ:INTC)® Xeon® 6900 series processors. In financial news, Supermicro reported record annual revenues of $14.94 billion and fourth-quarter revenues of $5.31 billion. The company has projected a revenue of between $26 billion and $30 billion for the fiscal year 2025. However, Supermicro has faced analyst downgrades from Mizuho Securities, JPMorgan (NYSE:JPM), and Barclays (LON:BARC) due to concerns about profitability risks, regulatory uncertainty, and market share loss in the AI server market. On the other hand, Needham initiated coverage on Super Micro with a Buy rating, forecasting a revenue compound annual growth rate (CAGR) of over 55% from the fiscal year 2021 to 2026. The company has been dealing with allegations of accounting irregularities by Hindenburg Research, which has led to a delay in filing its annual report. Despite these allegations, Rosenblatt has maintained a Buy rating on the company's shares, while CFRA and Wells Fargo (NYSE:WFC) have downgraded their ratings. These are the highlights of recent developments at Supermicro. As Super Micro Computer (NASDAQ:SMCI) works through its financial challenges, real-time data from InvestingPro provides a deeper perspective on the company's current standing. With a market capitalization of $26.78 billion and a P/E ratio of 20.62, SMCI is trading at a relatively low price relative to its near-term earnings growth. This is further supported by a PEG ratio of 0.29 as of the last twelve months, suggesting potential for investment value in terms of growth expectations. InvestingPro Tips highlight that analysts have recently revised their earnings upwards for the upcoming period for SMCI, indicating a positive outlook on the company's profitability. Moreover, Super Micro Computer has demonstrated a strong return over the last year, with a 93.96% price total return, signifying investor confidence despite recent price volatility. It's also worth noting that the company's liquid assets exceed its short-term obligations, providing financial stability. For investors seeking additional insights and detailed analysis, there are 17 more InvestingPro Tips available for Super Micro Computer, which can be found at InvestingPro Super Micro Computer. These tips could provide valuable guidance for those considering an investment in the company, especially in light of the recent adjustments made by Loop Capital.