Investing.com -- Loop Capital analysts reiterated their bullish stance on Super Micro Computer (NASDAQ:SMCI), maintaining a Buy rating and reaffirming that the stock remains on track to reach $1,000 (pre-10-for-1 stock split), despite recent reports of a U.S. Department of Justice (DOJ) inquiry.
In their note, Loop Capital downplayed the impact of the DOJ probe, which was first reported by The Wall Street Journal.
The analysts suggest that the inquiry is likely related to shipments to countries such as China and Russia, but emphasized that this may not affect the company’s ongoing operations.
“SMCI would be able to keep doing what it needs to do to get the 10-K filed while handling anything with the DOJ separately,” the analysts wrote.
Loop Capital also pointed out that Super Micro may have already been aware of the DOJ's probe.
The company has yet to publicly acknowledge the investigation, but the analysts note that Super Micro management sounded "constructive" during recent investor events in September.
This suggests the company was possibly already managing the situation behind the scenes. “We believe there is a legitimate possibility SMCI was already aware of anything that may now be going on with the DOJ,” they added.
Loop Capital remains confident in Super Micro’s long-term potential, projecting normalized revenues of $40 billion and a return to 14% gross margins and 10% operating margins.
The analysts argue that this could lead to a $50 normalized earnings per share (EPS) and a price-to-earnings (P/E) multiple of 20x, reinforcing their view that SMCI is “a $1,000 stock.”
Despite the uncertainty surrounding the DOJ probe, Loop Capital concluded, “This is admittedly not a 100% visibility situation," but they continue to see substantial upside for Super Micro.