There’s no arguing about it, Super Micro Computer (NASDAQ:SMCI) stock’s gains this year have been phenomenal. Up by 225% year-to-date, the server and storage systems maker’s strong returns have been based on its positioning in the AI server market.
So, can investors expect to see ongoing demand for SMCI’s products in its upcoming June quarter (fiscal fourth quarter) print?
Barclays analyst George Wang expects revenue in the quarter to come in between $5.1-5.5 billion – that’s within the company’s guided range. However, while an upside surprise is not likely for the June quarter, Wang thinks there will be left “some upside for future quarters.” Boosted by the launch of “new products, first to market, with limited competition such as DLC deployments with higher ASPs per rack,” the analyst expects a “likely better-than-expected” September quarter and FY25 revenue guide. “New product launches supporting NVDA H200, B100, B200, GB200 and AMD MI300X are expected to drive strong revenue growth for FY25,” the analyst went on to say.
While no top-line beat is in the cards for June, a beat could come from elsewhere. Due to the fact main rival Dell is shipping AI servers with “low profitability,” the biggest bear case for SMCI revolves around GMs (gross margins). Yet, according to Wang’s checks, there is some potential for better-than-expected GMs in the quarter, with his analysis suggesting the 13.7% guide might be “too low.”
Management has hinted at a possible GM beat, and Wang thinks a GM in the mid-14% range is a more likely outcome (the company’s long-term target is 14-17%). The optimism is down to the higher margins of DLC (direct liquid cooling) racks, as SMCI designs key components for liquid-cooling systems in-house, enabling them to charge a premium.
Looking ahead, SMCI also anticipates increasing its Direct Liquid Cooling (DLC) market share in data centers to 15% within one year whilst reaching 30% within two years, up from its current low single-digit percentage.
Bottom line, expecting a “robust year of AI server deployment led by Tier 2 Cloud, high-end enterprises like Tesla and xAI, as well as sovereign AI,” Wang rates SMCI stock as Overweight (i.e., Buy). Meanwhile, his $1,000 price target suggests shares will gain 8% over the coming months. (To watch Wang’s track record, click here)
The Street is evenly split here, with SMCI’s Moderate Buy consensus rating based on 5 Buys and Holds, each. Going by the $1,051.11 average price target, the stock will be changing hands for a ~17% premium a year from now. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
