How Investors Can Defy the Naysayers and Cash In on SMCI Stock

Regarding sheer relevance, it’s difficult to overlook the fundamental case for Super Micro Computer (SMCI). Specializing in high-performance servers that undergird artificial intelligence protocols, SMCI stock used to be a smoking-hot entity. Unfortunately, it also attracted serious controversy and a platoon of naysayers, derailing its extraordinary bullish rally. Still, a brewing comeback may have long legs, which could appeal to speculators, buy-the-dip specialists, and long-term value investors alike.

However, investors are advised to ignore the lousy PR smell because Super Micro is no stranger to making headlines. In particular, the company’s accounting woes have been well documented, plaguing the tech giant for months and weighing on sentiment like a monkey on its back. Further, management failed to file its annual reports on time, leading to Nasdaq issuing a sharp warning: submit required documents by Feb. 25 or risk getting the boot.

Fortunately, Super Micro is getting its act together in time. What’s more, SMCI stock call options may be mispriced, allowing daring bullish speculators to profit from the mismatch. All things considered, I am bullish on SMCI stock.

Bullish Sentiment Sustained by SMCI Management

SMCI stock has recently experienced significant positive momentum due to management’s efforts to right a sagging ship. Last week, Super Micro CEO Charles Liang announced that the company’s second-quarter revenues are projected to hit ~$5.65 billion. On paper, this forecast implies a 54% year-over-year growth rate.

Looking over the horizon, management is targeting $40 billion in sales for FY2026, implying robust growth from $23.5 billion to $25 billion. Market participants were clearly impressed with these figures, sending SMCI stock 26% higher last week.

Options Market Mispricing Tempts SMCI Stock Speculators

What could be most intriguing about Super Micro from a speculative standpoint is that the options market could be mispricing the derivatives underlining SMCI stock. In fact, there is a strong likelihood that SMCI call options are cheaper than they should be. Markets are imperfect and, at times, can misprice assets, thereby making particular trades more probable. This could be one of those times with SMCI stock.

First, SMCI stock enjoys an upward bias. A position entered into SMCI at the beginning of the week has a 53.58% chance of rising by the end. Over four weeks, the long odds rise to 57.79%, according to options pricing data.

However, the market responds dynamically to various events. Mathematically, a critical flaw of standard risk modeling approaches is that they often assume that price is an independent variable (i.e., what happened before has no bearing on what happens next). However, I find this assumption erroneous. Relative and relational pricing dynamics represent a critical catalyst.

As mentioned earlier, SMCI stock gained 26% last week. Whenever the security gains 20% or more in one week (an extreme-greed event), the long odds in the subsequent week rise to about 67%. Over four weeks, the long odds stay robust at nearly 64%.

In other words, the fear of missing out, or FOMO, drives SMCI stock price action. Investors see speculators securing abnormal profits from Super Micro’s trials and tribulations, and understandably, they want a piece of the action.

As for the mispricing, the expected movement calculator — which involves multiplying price, implied volatility for each options chain targeted, and the time decay adjustment (which accounts for the value loss of options over time) — forecasts an upper price range of $60.08 for the expiration date of March 7.

However, a dynamic calculation of that options chain shows that SMCI stock could hit a maximum price of $64.84 per share.

Two Compelling Trades to Consider

For the most aggressive options trade that’s arguably within the realm of rationality, speculators may consider the 57/60 bull call spread for the options chain expiring March 7. This transaction carries a maximum payout of 300% at the time of writing. The reward is so robust because few expect SMCI stock to hit the short call target of $60.

I, on the other hand, believe that it’s a distinct possibility (hence, the mispricing).

Much more conservative investors can also consider the 47/50 bull spread for the same expiration date. Here, SMCI stock only needs to hit $50 per share to collect the maximum payout, which stood at nearly 107% at the time of writing.

Is SMCI Stock a Good Buy?

On Wall Street, SMCI stock has a consensus rating of Hold based on three Buy, two Hold, and two Sell ratings obtained over the past three months. The average SMCI price target is $36.50 per share, implying a 24% downside risk.

See more SMCI analyst ratings

SMCI’s Momentum Keeps on Chugging Despite the Skepticism

Super Micro is mounting a comeback after struggling with accounting issues and Nasdaq’s compliance deadline. Strong revenue projections and ambitious long-term growth targets have reignited bullish sentiment, pushing the stock up over 26% last week. While some investors remain cautious due to supply chain risks and competition, market momentum and FOMO fuel optimism.

Adding to the excitement, options pricing may not fully reflect SMCI’s upside potential. Historical trends suggest the stock could extend its rally, creating opportunities for bullish speculators and long-term investors alike. With strong momentum and potential mispricing in the options market, speculators might find compelling setups to capitalize on the stock’s resurgence. Meanwhile, long-term investors can take advantage of pullbacks—often driven by naysayers with too much FOMO and insufficient risk appetite—to gradually build up a position in small increments.

Disclosure.