Despite a rather flat trading day thus far, Super Micro Computer (NASDAQ:SMCI) is certainly bucking the trend. Shares of SMCI stock are up over 5% in early afternoon trading as investors pile once again into this server storage company.
Today’s move appears to be directly tied to a key price target upgrade from Loop Capital. The financial firm now has the highest stock price on Wall Street when it comes to Super Micro, with analyst Ananda Baruah nearly tripling his price target on SMCI stock from $600 per share to $1,500 per share.
Such an upgrade suggests that Loop Capital may have underestimated the company’s valuation heading into this year and its potential for long-term growth tied to various artificial intelligence (AI) related trends. Such appears to be the case, with Loop Capital suggesting that increased confidence in Super Micro’s ability to capture market share amid surging demand from generative AI applications is the key reason for the upgrade.
Let’s dive more into what to make of this upgrade, and how much upside is now being priced in by this one analyst.
SMCI Stock Surges on Big Price Target Upgrade
As many investors know, analysts often chase moving targets. Companies that are in vogue, and which continue to see strong investor demand at much higher levels than previous price targets suggest should have been possible, are often revised higher. To some degree, today’s price target increase by Loop Capital makes sense in this regard, given how far and how fast SMCI stock has surged.
That said, the fact that this particular analyst suggests a 50% upside is possible from here (shares trade just shy of $1,000 apiece at the time of writing) is notable. The focus on AI-driven demand when it comes to servers and storage solutions has propelled this stock higher. Most investors are aware of this key catalyst. However, this analyst thinks the market may be under-pricing Super Micro’s lead in the server storage space due in part to the complexity of setting up server farms and the relative lack of ability for most companies to scale.
Certainly, Super Micro looks like the leader in its core niche. Over time, the stock’s valuation multiple should settle down to some reasonable level. The question is where future earnings will come in, leading to large discrepancies in price targets among analysts.
For now, I think this is a stock investors feel safe taking a bullish position on. It’s also a difficult one to value, hence the range of analyst price targets on SMCI stock. So, invest accordingly.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
