Despite some recent volatility, the long-term growth story at Super Micro Computer (NASDAQ:SMCI) remains intact. Twelve months ago, Super Micro Computer stock was $230 a share. Since then, the stock has risen 241% and grown from a small-cap security to being added to the S&P 500, and leading that benchmark index in terms of performance.
Most of the gain came this year,Super Micro Computer stock is up 175% since January. After peaking in mid-March, SMCI stock has experienced some volatility and dropped 36% from its 52-week high. Investors should see the pullback as a buying opportunity and take a position before the share price begins to run higher once again.
Post-Earnings Volatility
Super Micro Computer stock really took off after the company signed a deal to supply Nvidia (NASDAQ:NVDA) with servers that can be used in tandem with its microchips and semiconductors to run artificial intelligence applications.
Servers are in high demand as companies invest in infrastructure to support generative AI applications and models. The huge run up in SMCI stock over the past year has been due to sky high expectations for sales growth of its servers.
Heading into Super Micro Computer’s first quarter print, expectations might have been set too high for the company.
Despite beating Wall Street’s profit forecast, reporting 200% year-over-year revenue growth, and raising its forward guidance, SMCI stock fell more than 10%.
Had any other company posted as strong a quarter, their stock would have skyrocketed. But investors wanted more from Super Micro Computer after the huge run up in its share price.
Big Growth
Super Micro Computer reported EPS of $6.65 compared to $5.78 that was expected among analysts. Revenue came in at $3.85 billion, which narrowly missed the $3.95 billion consensus forecast of analysts.
Despite the miss, the company’s revenue was up 200% year over year. In the previous fourth quarter of 2023, Super Micro Computer reported 103% year-over-year revenue growth.
Super Micro Computer said its Q1 growth would have been greater had it not been for the shortage of a key component needed to make its in-demand servers.
Management said that their supply chain should be better moving forward. In terms of guidance, the company said it expects fiscal 2024 revenue of $14.70 billion to $15.10 billion, up from a previous outlook of $14.30 billion to $14.70 billion.
The new guidance implies astounding year-over-year revenue growth of 582% at the midpoint. Analysts had expected fiscal 2024 revenue of $14.60 billion, which is lower than the revised outlook provided by the company.
Buy Super Micro Computer Stock
The 10 professional analysts who cover SMCI stock currently have a median price target on it of $1,097.78, which implies 40% upside from current levels. There are currently no “sell ratings” on the stock.
The fact that the company’s share price fell after its Q1 print obscured the fact that Super Micro Computer is growing at breakneck speed, a fact that justifies both its share price and valuation. With demand for its servers rising and the AI revolution in full-swing, Super Micro Computer stock is a buy.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
