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San Jose, California-based Super Micro Computer, Inc. (SMCI) develops and manufactures high-performance server and storage solutions based on modular and open architecture. With a market cap of $14.6 billion, the company's operations span the United States, Europe, Asia, and internationally.
Super Micro Computer has significantly lagged behind the broader market over the past year. SMCI stock has plummeted 8.4% on a YTD basis and gained 2.1% over the past 52 weeks, compared to the S&P 500 Index’s ($SPX) 19.8% gains on a YTD basis and 31.1% returns over the past year.
Zooming in further, SMCI has underperformed the Technology Select Sector SPDR Fund’s (XLK) surge of 16.2% in 2024 and 30.3% over the past 52 weeks.
Super Micro’s stock plummeted 20.1% following the release of its Q4 earnings on Aug. 6. Despite strong revenue growth, its gross margin declined significantly from 17% to 11.2%, reflecting higher input costs that it couldn’t pass on to customers. This margin compression led to a substantial earnings miss, with adjusted EPS of $6.25, well below the analysts' expectations. Additionally, while management projected revenue growth for the next quarter, its profit forecast at the midpoint was slightly below consensus, adding to investor concerns.
For the current fiscal year, ending in June 2025, analysts expect SMCI to report a 41.8% year-over-year growth in adjusted EPS to $2.85. The company’s earnings surprise history has been mixed. It beat Wall Street’s earnings estimates in two of the past four quarters while missing on two other occasions.
SMCI has a consensus “Hold” rating overall. Out of the 12 analysts covering the stock, two recommend “Strong Buy,” one advises “Moderate Buy,” eight suggest “Hold,” and one advocates a “Strong Sell” rating.
This configuration is less bullish than three months ago, with seven “Strong Buy” ratings on the stock.
On Nov 4, Wedbush analyst Matt Bryson reduced Supermicro's price target to $32 and kept a “Neutral” rating after Ernst and Young resigned as its auditor. The firm sees questions around EY’s departure and a reported DOJ investigation as more critical than Supermicro’s financial results and guidance.
As of writing, SMCI is trading below the mean price target of $72.81. The Street-high target of $130 suggests a significant potential upside.
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