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Super Micro Computer (SMCI) has been among the hottest stocks in recent years, as it is part of the artificial intelligence (AI) boom. SMCI develops and manufactures high-performance server and storage solutions based on modern and open architecture, with a focus on liquid cooling technology.
The company has increased its revenue from $3.33 billion in fiscal 2020 (ended in June) to $11.81 billion in the last 12 months, powered by strong demand for its products and services.
Valued at a market cap of $50.2 billion, SMCI stock has returned a staggering 968% since the start of 2023 and is up over 3,330% in the last decade.
Let’s see if you should buy this tech stock at the current valuation.
Super Micro Computer Joins the Nasdaq-100
After starting the year as a member of the small-cap benchmark Russell 2000 Index (RUT), Super Micro Computer graduated to the S&P 500 Index ($SPX) of large-cap stocks as recently as March.
Now, SMCI will be added to the Nasdaq-100 Index ($IUXX) as of July 22, replacing Walgreens Boots Alliance (WBA). The Nasdaq-100 Index consists of the 100 largest non-financial companies listed on the Nasdaq exchange, and the recent changes in index membership showcases SMCI’s stellar growth.
Additionally, the company’s inclusion in the Nasdaq-100 should increase buying demand, as it will be purchased by mutual funds and exchange-traded funds (ETFs) that track the index.
SMCI Stock-Split Speculation
Another near-term driver for SMCI's share price is the growing possibility of a stock split. While it's just speculation for now, tech companies often make these types of moves in groups - and recent splits have been announced by several high-profile stocks in the space, such as Nvidia (NVDA) and Broadcom (AVGO).
Typically, a company announces a stock split to make it more affordable to retail investors, as this action lowers the share price and increases the number of outstanding shares. In other words, the fundamentals remain the same, but a stock split is often viewed as a positive corporate action that broadens the pool of potential buyers, and can results in higher liquidity.
SMCI stock trades at $876 at the time of writing, so a 10-for-1 stock split would reduce its price to less than $90 per share.
Is SMCI Stock a Good Buy?
Super Micro Computer specializes in IT infrastructure and designs solutions for high-performance graphics processing units, or GPUs. The demand for GPUs has skyrocketed in the last two years, as they power AI platforms - such as ChatGPT.
At the end of 2023, SMCI forecast fiscal Q2 of 2024 sales at $3.6 billion, up from its earlier forecast of $2.8 billion. Ultimately, it reported sales of $3.65 billion, up 103% year over year. Its top-line growth accelerated to 200%, as Super Micro Computer reported sales of $3.85 billion in fiscal Q3 of 2024.
Super Micro Computer is a high-flying tech stock in a rapidly expanding market with growing financials, making it a top investment choice in July 2024.
What's the Target Price for Super Micro Computer Stock?
Out of the 13 analysts covering SMCI stock, seven recommend “strong buy,” five recommend “hold,” and one recommends “strong sell,” for a “moderate buy” consensus.
The average target price for SMCI stock is $1,027.73, indicating an upside potential of 17.2% from current levels.
Analysts tracking SMCI stock expect sales to rise from $7.12 billion in 2023 to $14.93 billion in 2024, with continued growth to $23.96 billion in 2025. Adjusted earnings are forecast to expand from $11.81 per share in 2023 to $23.86 in 2024, rising to $34 in 2025. Analysts expect SMCI stock to end 2028 with adjusted earnings of $150.
So, if the stock is priced at 20x forward earnings, it should trade at $3,000 by July 2028.
On the date of publication, Aditya Raghunath 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.
