Can SMCI keep the AI- momentum rolling?
Super Micro Computer Inc. (SMCI) reports Q2 results tonight after the close. The stock has been on a tear after it preannounced numbers on January 18. The company forecast top and bottom line results well above expectations, leading to a 57% surge in the stock. Investors will want to see if the momentum can continue into 2024 as these stocks try and justify frothy valuation. This surge has contributed to a staggering 474% increase in share price over the past 12 months, from around $76 to $436.
Super Micro Computer Inc. is a leading provider of application-optimized, high-performance server and storage systems . The company offers a diverse range of products, including server and storage systems, server software management solutions, and global services. With a significant direct sales presence, SMCI has established relationships with over 1,000 customers across more than 100 countries. Additionally, it reaches thousands of end users through an extensive indirect sales channel.
SMCI collaborates with third-party suppliers and contract manufacturers, including Ablecom Technology and Compuware Technology, to support product design and manufacturing coordination. SMCI's strategic approach is centered around its strong engineering focus, with engineers comprising half of its workforce. This engineering-centric philosophy allows the company to rapidly integrate emerging technologies from major players like Nvidia, AMD, Intel, and ARM into its innovative solutions. By designing and customizing solutions in-house, SMCI sets itself apart from competitors by offering cost-effective products that excel in low power consumption and efficient heat management.
Its extensive product range, strong engineering focus, and ability to swiftly integrate emerging technologies have distinguished it from its competitors. Super Micro Computer offers cost-effective products with low power consumption and efficient heat management.
In terms of financial forecasts, SMCI has revised its revenue guidance range to $3.6 billion to $3.65 billion, up from the previous range of $2.7 billion to $2.9 billion. The range for earnings per share (EPS ) has been raised to $4.90 to $5.05, compared to the previous range of $3.75 to $4.24. Additionally, the adjusted EPS guidance has increased to $5.40 to $5.55, up from the previous range of $4.40 to $4.88. The strength in SMCI's performance is driven by deals related to artificial intelligence (AI).
SMCI's sales are primarily dependent on NVDA GPU allocation, Wedbush sees the uptick in revenue as a bullish signal for NVDA growth through the fourth quarter.
With Q2 results out of the way, investor focus will turn to the company"s Q3 outlook. Analysts expect revenues for the March quarter will grow by a mid-single-digit percentage quarter-over -quarter, with full-year 2024 revenue projected to reach $14 billion. It will be important for SMCI to project these numbers to the market.
After its explosive upward quarterly guidance revisions last week, Super Micro Computer's bullish momentum has continued into this week's trading. The company's stock price has also been boosted by ASML's better-than-expected fourth-quarter report. Investors may view the stock as pricey given the run but we would note it has grown into its valuation as forward earnings stands at 21x. Some may view this as a discount given the company"s position in the AI food chain.
Overall, Super Micro Computer Inc. is experiencing significant growth potential and has positioned itself as a leader in providing high-performance server and storage systems. The company's focus on engineering and its ability to integrate cutting-edge technologies set it apart from competitors. With its strong financial performance and positive guidance, SMCI appears to be an attractive investment option in the chip space, particularly with the increasing demand for AI- oriented deals.