Super Micro Computer, Inc. Faces Market Challenges Amid Revenue Growth

San Jose, California-based Super Micro Computer, Inc. (SMCI) specializes in high-performance server and storage solutions built on modular and open architecture. The company has a market cap of $19.7 billion and caters to enterprise data centers, cloud computing, artificial intelligence, 5G, and edge computing markets.

Performance Overview

Over the past 52 weeks, SMCI has significantly lagged behind the broader market. Shares of SMCI have declined 60.3%, in contrast to the S&P 500 Index ($SPX), which has surged 8.2%. However, year-to-date (YTD), SMCI’s stock has increased by 8.1%, outperforming SPX’s 4.7% decline.

Sector Comparison

When focusing on sector performance, SMCI has also underperformed compared to the Technology Select Sector SPDR Fund (XLK), which gained 4.3% in the past year. Nevertheless, on a YTD basis, SMCI has eclipsed XLK’s 8.1% decrease.

Q3 Earnings Results

SMCI released its Q3 earnings on May 6, revealing a revenue of $4.6 billion. This marks a 19.5% increase from the same quarter last year, driven mainly by robust growth in its Data Center Building Block Solution (DCBBS), Direct Liquid Cooled-2 (DLC) systems, and advancements in AI technology. However, income from operations fell sharply by 61.2% to $146.8 million, largely due to rising costs in sales and operating expenses. Consequently, adjusted earnings dropped 53% year-over-year to $0.31 per share. The company has also revised its fiscal 2025 revenue forecast, now estimating revenue between $21.8 billion and $22.6 billion.

Analyst Expectations

For the current fiscal year ending in June, analysts predict SMCI’s EPS will slightly decline year-over-year to $2. The company’s earnings surprise history is lackluster, missing consensus estimates in two of the last three quarters while surpassing them once.

Among the 16 analysts analyzing the stock, the consensus rating is a “Hold.” This rating comprises four “Strong Buy,” two “Moderate Buy,” eight “Hold,” and two “Strong Sell” recommendations.

Recent Analyst Ratings

This assessment is slightly more optimistic than two months prior, with three analysts now suggesting a “Strong Buy” rating. On April 30, JPMorgan Chase & Co. (JPM) maintained a “Neutral” rating on SMCI and reduced its price target to $36, indicating a potential upside of 9.3% from current levels.

The average price target stands at $51.22, which reflects a 55.5% potential upside from current prices. The highest price target of $100 suggests an ambitious upside potential of 203.6%.

On the date of publication, Neharika Jain did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.