Super Micro Computer (NASDAQ:SMCI) went on an incredible run in 2023 and early 2024, but the performance of Super Micro Computer stock has been far less stellar lately. In fact, shares in the AI server company have fallen by more than a third from their highs.

To many, this has marked the beginning of the end for Super Micro. In their view, lower prices lie ahead, as the company’s high growth proves to be a short-lived phenomenon, and the stock derates accordingly.

Yet while this is a popular view among market participants , this take may not be on the money. At least, based upon the latest results and outlook from the company.

It may not happen next week or next month, but don’t dismiss SMCI’s comeback potential. With expectations now set so low, the ingredients are in play for shares to experience a big rebound.

Super Micro Computer Stock and the Market’s Overly Cautious View

While not completely out of the picture, “AI mania” is not what it used to be. Enthusiasm for shares in companies poised to benefit from the generative artificial intelligence secular growth trend has fallen considerably since March.

Although sentiment has stabilized somewhat for some of the top-performing AI hardware and software stocks, in other situations, like the situation with Super Micro Computer stock, investors have become overly cautious.

Case in point: the market’s reaction to SMCI’s latest earnings release. On April 30, Super Micro released its results for the quarter ending March 31, 2024.

For the quarter, sales tripled year-over-year, and increased by 5.2% on a sequential basis. Earnings per share were up more than fourfold compared to the prior year’s quarter. Despite the slight increase in quarter-over-quarter sales, EPS increased by nearly 19%. While missing on revenue, the company’s earnings handily beat expectations.

That’s not all. Super Micro Computer also upped its guidance, to levels above that of prior sell-side forecasts. Nevertheless, while focusing more on the negatives such as the revenue miss, and perhaps expecting a much larger “beat and raise” with earnings and guidance, the market bid down SMCI by 14% in response.

Low Expectations, High Upside Ahead?

Since tumbling after earnings, Super Micro Computer stock has bounced back somewhat, yet still remains far below its $1,229 per share high water mark. However, don’t assume that shares, holding steady, are on the verge of making a further retreat to lower prices.

Why? While the market clearly went overboard bidding up Super Micro Computer to such lofty price levels, the market’s current response to recent news with SMCI represents an overreaction in the other direction.

Following the pullback, the stock is reasonably priced at 34.5 times estimated earnings for the fiscal year ending June 2024.

The analyst community remains bullish that the coming fiscal year ending June 2025 will be another strong one for Super Micro.

Sell-side forecasts call for EPS of around $30 per share next year. That’s 37.6% above earnings forecasts for this fiscal year. Although investors are doubtful, much suggests that these doubts are not well-founded.

As we have pointed out previously, not only is demand for AI servers likely to remain strong going into next year. Rather than getting squeezed by competition, Super Micro’s competitive moat signals strong potential for the company to grow its share of the AI server market.

The Verdict: A Bona Fide ‘Buy the Dip’ Play

Forget about merely meeting consensus. Taking into account its strengths and edge against the competition, Super Micro Computer could even hit the higher end of EPS forecasts, which call for earnings above $35 per share this fiscal year.

Over the next few quarters, if subsequent earnings releases and guidance updates convey that the company is still in the high-growth fast lane, a big recovery for SMCI may take shape.

Re-hitting $1,229 per share, over 50% above current price levels, is well-within reach if this scenario plays out.

Although shares could stay volatile for now, if you currently own Super Micro Computer, stay the course. If you’ve been waiting on the sidelines, now’s your moment to “buy the dip” at a favorable entry point.

Super Micro Computer stock earns an A rating in Portfolio Grader.

On the date of publication, Louis Navellier had a long position in SMCI. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.