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How many investors had heard of Super Micro Computer Inc. ( NASDAQ: SMCI ) a couple of years ago? It was a steady growth stock of a company that succeeded by keeping on top of current trends. But it wasn't really making any waves. However, it was well-positioned to catch a big industry wave. Shareholders and would-be investors must be wondering where the stock could be headed. Will it continue to skyrocket? Or has it plateaued? Let's take a look at what analysts think.
Why Invest in Super Micro Computer?
Since going public in 2007, Super Micro Computer stock is up more than 870%. The company is known for its reliable products and services in the enterprise, cloud computing, artificial intelligence (AI), Metaverse, and 5G arenas. It has risen from relative obscurity to prominence on the wave of interest in AI in the past year. And the share price has reflected it this year. Yet, in the past 90 days, the stock has retreated somewhat. Now, investors must decide if the stock and the company have peaked, or whether the pullback is a great opportunity to get a still-rising stock at a bargain.
Supermicro, the Company
A top AI infrastructure provider.
The company develops and manufactures high-performance server and storage solutions based on modular and open architecture. Its offerings include modular blade servers, blades, workstations, full racks, networking devices, server sub-systems, server management software, and security software. It provides its products to enterprise data centers, cloud computing, artificial intelligence, and 5G and edge computing markets.
Super Micro Computer, also known as Supermicro, is based in San Jose, California. It was founded in 1993 by Taiwanese billionaire and others, and it went public in 2007. Competitors include Cisco Systems Inc. ( NASDAQ: CSCO ), International Business Machines Corp. ( NYSE: IBM ), Hewlett Packard Enterprise Co. ( NYSE: HPE ).
Elon Musk has selected Super Micro Computer to provide some of the hardware for his AI initiative. Also, there has been speculation that it may follow the lead of Nvidia and others with a stock split, as well as that the stock may join the Nasdaq 100 . It debuted on the Fortune 500 this year. And the company just announced it aims to build three new manufacturing facilities to meet strong demand for liquid-cooled AI hardware. Earnings exceeded consensus estimates by double-digit percentages in the past few quarters.
Three Stocks That Have Seen Higher Share Gains Than Super Micro Computer
Supermicro, the Stock
Supermicro's share price is about 290% higher than a year ago, most of that gain since the beginning of this year. The Nasdaq is up about 26% year over year. Note that the $1,023.42 consensus price target is less than the 52-week high of $1,229.00 a share.
Out of six analysts who cover the stock, just two recommend buying shares. Rosenblatt reiterated its Buy rating in May, and Loop Capital did the same in April. Supermicro is also popular with hedge funds, including at Vanguard, BlackRock, and State Street. Also note that a couple of directors sold small batches of shares in June, and CEO Charles Liang also did in May.
Wall Street expectations for where the stock goes in the next 52 weeks vary significantly. While one analyst anticipates strong further upside, the lowest price target indicates a significant drop in the share price.
| Low target | $285.00 | −69.9% |
| Mean target | $1,023.42 | 22.2% |
| High target | $1,500.00 | 79.0% |
Perhaps the biggest downside risk is that the AI bubble bursts spectacularly. Other risks include management getting caught up in another accounting scandal, or failing to meet its revenue growth goals, perhaps due to losing major customers, such as Meta Platforms Inc. ( NASDAQ: META ), on which it relies.
But clearly some analysts expect the rally to continue, that AI is here to stay and will continue to drive the stock and the market for a year or longer. Strong growth will depend on solid revenue, profit, and margin growth, for the company to run on all cylinders.
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