After an entire year of consistently declining prices, scaring away investors with lower levels after lower levels, allegations, and accounting scandals, one stock has potentially found a bottom-to-price in the worst of the worst and is leaving investors with only upside moving forward. The risk-to-reward setups are what’s going to drive investment capital in the coming quarters, and it starts with this stock.
In the technology sector, many investors are focused on the impact of artificial intelligence on the future of the United States economy, an interest that has driven several stocks to obscene new highs. However, some names have fallen behind and are due to catch up, and that is why today’s opportunity is found in shares of Super Micro Computer (NASDAQ:SMCI).
With this in mind, investors should focus on what the recent quarterly earnings announcement means for the company moving forward, especially as it still trades at only 39% of its 52-week high today despite a 26% rally over the past week alone. It looks like the market has digested the news in an optimistic way, realizing that the worst may be behind for this formerly accused business
Super Micro Stock in the Clear
As of the latest quarterly updates, management at Super Micro Computer reiterated that by February 25th, 2025, the company will release its quarterly financials under its new accounting and finance auditing team. Even with this forecast, some investors were left to wonder what should be expected.
Well, management pointed out a couple of things to be wary of, beginning with revenue. The preliminary revenue figures point to Super Micro Computer delivering up to $5.7 billion in net revenue, or a 54% growth rate over the year. Now, here’s what investors should be aware of with this figure.
Super Micro Computer’s success is also tied to Nvidia's (NASDAQ:NVDA) success, considering that they use the graphic processing units (GPUs) made by Nvidia. This stock is arguably the most important in today’s market when it comes to sentiment and earnings size, so this could be a precursor to what could be reported from it.
Along with this aggressive revenue projection, management also pointed out a massive tailwind that is already brewing in the industry. This tailwind comes in the form of data center demand, of which over 30% are expected to carry Super Micro Computer’s direct-liquid cooling (DLC) technology.
Counting on this market share and growth forecasts, it would seem that the stock’s comeback is only getting started, and new 52-week highs should be expected in the coming months. However, this is only half of the equation; the other half has to be solved by figuring out what the market feels about this company's future.
The Market’s Take on Super Micro Computer Stock
Price action can be used as the initial starting point for investors to figure out the sentiment behind Super Micro Computer stock today, but it’s only a fraction of what is actually happening behind the scenes. The other factors come through Wall Street ratings and the market’s valuation metrics for the company.
Starting with the way analysts see Super Micro Computer stock today, a consensus price target of $60.20 per share should get some investors excited since it calls for up to 26% upside from today’s low price. However bullish this may seem, it is still a long way from the stock’s 52-week high of $122 per share.
Now for the rest of the market’s sentiment. Over the past quarter, when the market had basically priced the worst-case scenarios into the stock, some buyers became interested in the undeniable discount that the stock’s low price offered.
Investors can see this theme at play through the $4 billion in institutional capital that came into the stock, led by those at Geode Capital Management, who stacked up a position of up to $390.6 million today, or 2.2% ownership in the company. Even though the stock has already rallied by 26% in a week, it still offers a steep discount to peers today.
By trading at a price-to-earnings (P/E) ratio of 24.0x today, Super Micro Computer stock still trades well below the computer sector’s average valuation of 33.2x, giving investors plenty of room to still catch up.
Investors should also remember that Nvidia stock trades within 90% of its 52-week high, meaning bullish financial outlooks for that name will likely cause these revenue projections to come true at Super Micro Computer.