Down 33% from its 52-week high, Super Micro Computer (NASDAQ:SMCI) stock is a screaming buy at current levels.
Despite the pullback and volatility seen in SMCI stock during the just completed second quarter, the company’s share price is up 188% year to date, making it the best performing stock in the benchmark S&P 500 index.
Not even Nvidia’s (NASDAQ:NVDA) stock has performed better than Super Micro Computer. Making the gains even more impressive is the fact that Super Micro Computer’s stock only joined the S&P 500 on March 18 this year.
Super Micro Computer was added to the benchmark index following a rally that saw its share price increase tenfold over the past 18 months. At the start of 2023, SMCI stock was trading for less than $85 per share.
Today, the stock is changing hands at $820. While the share price has pulled back from its all-time high of $1,229 reached in March shortly after joining the S&P 500, it likely won’t be long before the stock is rallying again.
Exceptional Growth
Super Micro Computer makes data centers that power artificial intelligence models and applications. To say that the company’s products are in high demand is an understatement.
Super Micro Computer’s market capitalization has soared from $4.50 billion at the end of 2022 to $45 billion today as its sales and profits have grown exponentially.
The company’s financials and its stock really took off in spring 2023 after the company announced a strategic partnership with leading AI microchip designer Nvidia.
For this year’s first quarter, Super Micro Computer reported 200% annualized revenue growth and raised its forward guidance. It’s a sign of how lofty expectations have gotten around the company and its stock that the 200% sales growth missed Wall Street’s targets.
High Expectations for SMCI Stock
The maker of high-efficiency servers reported first-quarter EPS of $6.65 compared to $5.78 that was expected among analysts.
Revenue for Q1 came in at $3.85 billion, up 200% year-over-year, but still below the $3.95 billion consensus expectation on the Street. In the previous fourth quarter of 2023, Super Micro Computer reported 103% year-over-year revenue growth.
The company raised its forward guidance, saying it now 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 year-over-year revenue growth of 582% at the midpoint.
Analysts had expected fiscal 2024 revenue of $14.60 billion. Management noted on their earnings call that some supply chain issues they encountered earlier this year have improved and should be better moving forward.
More Upside Ahead
Analysts largely remain bullish on Super Micro Computer stock. While the current rating on SMCI stock is a “moderate buy,” with five “buy” and four “hold” ratings, the median price target on the shares is 30% higher than current levels, suggesting more upside ahead.
The lowest rating on the stock is right around where it is currently trading, implying a possible bottom for the share price.
Analysts continue to like the opportunity that Super Micro Computer has with its AI servers, not just with Nvidia but with other companies that are pushing into the red-hot technology field.
Recently, Elon Musk announced on social media that Super Micro Computer will provide servers to help his startup company called “xAI” develop a supercomputer. News of the work with xAI gave SMCI stock a boost.
Buy SMCI Stock
Despite its recent pullback, Super Micro Computer remains an incredible growth stock with plenty of momentum behind it.
The decline in the company’s share price can be attributed to high expectations following blistering growth over the past year. And that growth continues, with Super Micro Computer forecasting nearly 600% revenue growth this fiscal year.
Analysts see the shares rising at least 30% over the next 12 months and investors who get onboard now are likely to benefit from the recovery.
As the company signs new contracts and the AI boom gathers steam, 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.
