Super Micro Computer (NASDAQ:SMCI) and drama were synonymous last year. Shares of the AI server maker were one of early 2024’s big winners, surging dramatically until a series of events brought the stock crashing down.
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These were all related to corporate governance; short-seller Hindenburg Research accused the company of accounting irregularities, and making matters worse, SMCI delayed filing its FY24 financial results, thereby risking a delisting from the Nasdaq. Additionally, Ernst & Young resigned as the company’s auditor last October, citing worries about financial accuracy.
Recently, however, the stock has been in recovery mode. An internal probe, led by a special committee, found no evidence of fraud or misconduct. SMCI appointed BDO as its new auditor and received a Nasdaq extension to file its results by February 25. If it meets this deadline, the company could regain compliance.
Amid all this upheaval, it’s easy to overlook SMCI’s pivotal role in a rapidly growing industry. Loop Capital analyst Ananda Baruah highlights this very point, emphasizing the company’s strong value proposition despite the past year’s drama.
“SMCI remains an important company in an important space with both special situation catalysts (i.e. getting SEC filing current) and fundamental as GB200 & GB300 (Blackwell) ramp heading into summer and key customers get into full swing (Tier 2 CSPs),” Baruah said.
Moreover, SMCI’s two largest customers have ambitious plans for 2025, which Baruah believes will inevitably benefit the company. However, that is most likely to come later in the year, and investors will need to show some patience beforehand. Baruah thinks that in the December quarter, demand “remained intact,” but his view is that March quarter revenue could decline sequentially due to tier 2 customers delaying spending as they await the Blackwell/GB200 ramp. Additionally, there’s the likelihood HPE secured a project with xAI.
So a bumpy first half for 2025 is in the cards although that should change in 2H. By the December quarter, or possibly even the September quarter, Baruah believes SMCI could surpass $8 billion in quarterly revenue, the growth driven by GB200 and GB300 volume ramping in the second half of 2025, along with Tier 2 CSPs getting “holistically back into spending” on Blackwell after scaling back Hopper purchases starting in fall 2024.
With that opportunity ahead, Baruah has raised his price target from $35 to $40, although he stressed the path to getting there won’t be “a straight line.” That new target makes room for an upside of 42% from current levels. Baruah’s rating remains a Buy. (To watch Baruah’s track record, click here)
However, Baruah stands as the sole SMCI bull on Wall Street at the moment. With an additional 5 Holds and 2 Sells, the stock claims a Hold (i.e., Neutral) consensus rating. With an average price target of $27.75, the broader outlook suggests the stock might tread water for 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.
