Super Micro Computer (NASDAQ:SMCI) shares present an interesting situation, being down 60% from the all-time high reached earlier in the year while still managing to post year-to-date gains of 68%.
The highs have been down to the company’s positioning in the AI space, where demand for SMCI’s products has been very strong. The lows have partly been on account of the company stating it won’t file its annual 10-K report on time. That came after SMCI was accused of various wrongdoings by a prominent short seller.
This means there have been some good times and bad times for the maker of server and storage systems, but what should investors expect next?
According to Northland’s Nehal Chokshi, a 5-star analyst ranked among the top 1% of Wall Street experts, the current valuation presents an excellent opportunity.
“A 14x P/E for an AI leader is very appealing and more than compensates for the various moving parts that create short-term risk,” Chokshi explained.
Those “moving parts” include the 10-K filing delay noted above and “profitability pressure concerns.” But Chokshi thinks the 14x multiple already reflects the current worries, including the delay in the 10K filing, which the analyst expects will be sorted out by November 27th as “alluded to by updated debt agreements.”
Additionally, while there is some risk of a “potential air pocket” in AI server shipments during the December quarter due to the late Blackwell launch, a look at industry data suggests this might not necessarily happen; Chokshi is buoyed by data that shows robust ongoing demand for the Hopper GPUs, which the analyst thinks will “likely remain solid.” Lastly, Chokshi anticipates the “profitability pressure” will show clear signs of recovery by next year’s March quarter readout.
With these “near-term risks priced in,” Chokshi rates SMCI shares an Outperform (i.e., Buy), along with a $130 price target. That suggests the stock is on track to post growth of a big 172% in the year ahead. (To watch Chokshi’s track record, click here)
The Street’s overall take offers a bit of a conundrum here. On the one hand, the stock only claims a Hold (i.e. Neutral) consensus rating, based on a mix of 3 Buys, 10 Holds and 1 Sell. However, the average price target stands at $64.22 and factors in a 12-month gain of ~34%. It will be interesting to see whether some analysts upgrade their ratings or reduce their price targets shortly. (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.
