Super Micro Computer (NASDAQ:SMCI) stock is plunging lower by nearly 20% after reporting its fourth-quarter earnings.
The server and storage company’s revenue grew by 143.6% to $5.31 billion, just barely beating the analyst estimate of $5.30 billion. Its adjusted EPS was $6.25, short of the estimate of $8.07.
In addition, Super Micro’s guidance blew it out of the ballpark. It guided for first quarter revenue between $6 and $7 billion compared to the analyst estimate for $5.46 billion. For the fiscal year ending June 30, 2025, it expects to generate between $26 and $30 billion of revenue, much higher than the estimate for $23.4 billion.
On top of that, Super Micro also announced a 10-for-1 stock split.
“We are well positioned to become the largest IT infrastructure company, driven by our technology leadership including rack-scale DLC liquid cooling and business values of our new Datacenter Building Block Solutions,” said CEO Charles Liang.
SMCI Stock: Analysts Cut Price Targets on Margin Fears
However, a major factor holding back SMCI today is its declining margins. During the quarter, Super Micro had a gross margin of 11.2% compared to 17% a year ago and 15.5% during the previous quarter. That’s attributed to its cost of sales ramping to $4.71 billion compared to $1.81 billion year-over-year as competition ramps up with Dell (NYSE:DELL) and Hewlett Packard (NYSE:HPE). In fact, cost of sales growth of 159.8% outpaced revenue growth of 143.6%.
Following earnings, Bank of America analyst Ruplu Bhattacharya lowered his price target to $700 from $1,090 while dropping his rating to “neutral” from “buy.”
“[We] see the next several quarters remaining margin-challenged as Super Micro navigates a competitive pricing environment, delayed shipment of Nvidia’s Blackwell GPU systems that require liquid cooled racks, and ongoing issues with component availability,” said Bhattacharya. The analyst expects Super Micro’s margins to recover by the end of 2025.
Bhattacharya wasn’t alone, as several other analysts also slashed their price targets:
- Barclays lowered its target to $693 from $1,000.
- Goldman Sachs lowered its target to $675 from $775.
- Wells Fargo lowered its target to $650 from $890
- Wedbush lowered its target to $620 from $800.
On the date of publication, Eddie Pan did not hold (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.
On the date of publication, the responsible editor held a LONG position in NVDA.
