AI play Super Micro is getting crushed, but most analysts stay bullish

Super Micro Computer shares are selling off at the moment, but major Wall Street firms are hopeful about the company’s long-term prospects. Super Micro, one of the vendors that builds Nvidia-based servers, released quarterly results on Tuesday after market close. The company reported adjusted earnings of $6.65 per share in its fiscal third quarter, higher than the $5.78 per share that analysts polled by LSEG had forecasted. Super Micro also bumped up its fiscal 2024 revenue guidance above its previously estimated range and what analysts are expecting. But a revenue miss dragged shares of Super Micro 16% lower on Wednesday. The company reported revenue of $3.85 billion in its last quarter, which came slightly below the $3.95 billion consensus estimate. Despite this pullback, Wall Street banks largely remained bullish on the stock. JPMorgan, Barclays and Bank of America all reiterated their overweight-equivalent ratings. JPMorgan has the highest price target out of the three, with analyst Samik Chatterjee’s $1,150 objective implying about 34% upside for the stock from its Tuesday closing price of $858.80. “We continue to be positively surprised by the robust revenue momentum and the sustained industry demand momentum, with Super Micro’s ramp reinforcing its robust leading position in the market, all of which leads us to maintain our Dec-24 price target of $1150, which now implies 30%+ upside,” Chatterjee said. Bank of America analyst Ruplu Bhattacharya sees the stock rallying to $1,090, while Barclays analyst George Wang has set a $1,000 price target. All three analysts noted artificial intelligence-propelled tailwinds as growth drivers for the stock, with Wang also highlighting the company’s strong competitive moat as a catalyst. “We also see a new wave of demand from sovereign AI as we head into CY25 as Middle East (UAE and Saudi Arabia) as well as Sweden, Japan, Korea, and Malaysia should provide more AI revenue headroom over the next few quarters,” Wang added. On the other hand, Goldman Sachs and Wells Fargo maintained their neutral-equivalent ratings for shares of Super Micro. While Wells Fargo thinks the stock could rise to $890, Goldman Sachs’ $800 target implies a roughly 7% slide. “While the potential margin dilutive impact from AI server sales and/or competition (e.g., DELL, ODM) is a concern, SMCI reiterated its long-term 14-17% gross margin target and we believe elevated product costs from liquid cooling should normalize over time,” wrote Goldman Sachs analyst Michael Ng. “Separately, SMCI said it could need additional capital to support growth.” However, Ng pointed out that demand continues to appear strong, which should further support Super Micro’s future deliveries of AI supercomputers.