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Shares of Super Micro Computer (SMCI) have been on an absolute tear in the last decade, rising over 4,100% since late February 2014. In this period, the tech-heavy Nasdaq Composite ($NASX) has returned “only” 271%.
Valued at a market cap of $47 billion, Super Micro Computer stock has risen by an astonishing 768% in the past year - and SMCI may still have significant upside, according to Wall Street. Let’s see what analysts expect from this tech stock, and whether it can continue to outpace the broader markets.
An Overview of Super Micro Computer
Super Micro Computer develops and manufactures high-performance server and storage solutions based on open architecture for enterprise clients in the U.S. and other international markets. These solutions range from storage systems, modular blade servers, workstations, networking devices, server management software, and security software.
Similar to Nvidia (NVDA), Super Micro Computer is well positioned to benefit from the artificial intelligence (AI) megatrend. While Nvidia designs and sells AI-powered chips, Super Micro Computers turns the chips into enterprise servers used to run high-end AI applications, including large language models, or LLMs.
Is SMCI Stock Overvalued?
Prior to 2023, Super Micro Computer stock was quite cheap, and was priced at 10x forward earnings - much lower than the S&P 500 Index ($SPX) average of 27x. Historically, asset-light, high-margin tech companies command a premium valuation, while hardware players like SMCI trade at lower multiples.
However, the stock's upward run was nearly inevitable, given that the company has increased its sales from $3.33 billion in fiscal 2020 (ended in June) to $7.12 billion in fiscal 2023. In the last 12 months, Super Micro Computer has recorded revenue of $9.25 billion, as sales more than doubled in fiscal Q2 of 2024 to $3.66 billion while net income surged by 68% to $296 million.
Analysts expect SMCI's sales to rise to $14.47 billion in fiscal 2024 and to $19.56 billion in fiscal 2025. Comparatively, its adjusted earnings are forecast to rise by 48.2% annually in the next five years.
Priced at 2.5 times forward sales and 29.8 times forward earnings, SMCI stock is quite cheap. Given consensus estimates, its earnings per share should touch $84 in fiscal 2028. If the stock is priced at 25x forward earnings, SMCI stock should be trading at $2,100 within the next four years.
What's the Target Price for Super Micro Computer Stock?
Despite its market-thumping gains, brokerage firm Rosenblatt believes SMCI stock has more room to run. Rosenblatt analyst Hans Mosesmann just raised his price target on the tech stock to a new Street-high of $1,300, up from $700, and maintained his “Buy” rating.
In a note, Mosesmann explained that the higher price target “is a reflection of the robust growth in AI computing and the company’s strategic position within this rapidly evolving market.”
Out of the eight analysts covering SMCI stock, five recommend “strong buy,” two recommend “hold,” and one recommends “strong sell.” The average target price for SMCI is $717.38, representing a discount of 15.7% to Tuesday's close. The new Street-high target of $1,300, on the other hand, indicates expected upside of 52.7% from here.
