Goldman Sachs (GS) analyst Mike Ng reiterated a Hold rating on Super Micro Computer (SMCI) stock and raised the price target. Despite SMCI’s recent ouster from the Nasdaq-100, Ng increased the price target to $32 from $28, which still implies a 5.3% downside from current trading levels.
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On December 23, SMCI will be replaced by Palantir Technologies (PLTR) on the Nasdaq 100 index. Furthermore, a Bloomberg report also cited that SMCI could be considering raising more capital through additional stock sales or debt issuance. While SMCI faces multiple challenges related to accounting manipulations and the possibility of a Nasdaq delisting, its core business remains strong. Notably, revenue and margins have both grown steadily, despite these headwinds.
SMCI’s Business Keeps Growing Stronger
Looking ahead, for Q1FY25, SMCI’s preliminary results show that revenue will be between $5.9 billion and $6 billion, which represents a remarkable 183% year-over-year increase. In addition, gross margins improved to 13.3% from 11.3% reported in Q4FY24, signaling strong operational efficiency.
This growth is primarily driven by booming server demand, especially AI server sales, which have been a major contributor to SMCI’s revenue. Moreover, SMCI has deployed one of the largest AI superclusters using DLC (direct liquid cooling) technology, featuring 100,000 Nvidia (NVDA) GPUs (graphics processing units). As a result, the company aims to become one of the largest DLC suppliers for data centers, with management estimating that the DLC market share will grow tenfold by 2025.
Additionally, SMCI continues to stay ahead of the curve by incorporating innovative chips from major chip makers into its products. Nvidia’s highly anticipated Blackwell chips are expected to begin shipping this quarter, which could drive further growth for SMCI as they secure more orders.
Finally, despite the potential risks of a delisting, SMCI is currently trading at a P/E multiple of 16.4x, which is significantly lower than the industry average and its own 5-year historical average. This suggests that the stock is undervalued. However, investors should remain cautious about the implications of a potential delisting, which may explain why Goldman Sachs’ analyst maintains a Hold rating on SMCI stock.
Does SMCI Have a Future?
A majority of analysts prefer to remain on the sidelines when it comes to Super Micro Computer, primarily due to the ongoing challenges the company faces. As a result, it is largely considered a wait-and-watch story. Investors and analysts alike are taking a cautious approach, waiting for SMCI to resolve its financial allegations and avoid a potential delisting before making any further moves.
On TipRanks, SMCI stock holds a consensus rating of Hold, based on two Buys, five Holds, and two Sell ratings. Additionally, the average SMCI price target is $38.57, implying a 14% upside potential from current levels. Year-to-date, SMCI stock has gained 18.9%.
