SMCI is on a Wild Ride – Here's What You Should Know Dear Reader, Back in February, I told you about a previously little-known stock that had emerged as one of the undisputed market leaders in 2024 so far.
If you recall, the company in question – Super Micro Computer Inc. (SMCI) – was no stranger to my Accelerated Profits readers. In fact, we've had this stock in our Buy List since June 2022.
Now, Accelerated Profits subscribers who bought this pick back then are sitting on gains of more than 1,400%! But the ride has been a bit bumpy lately.
Given the recent volatility, many readers have been asking about the stock, wondering what's behind the sudden drop recently – and what to do next. So, in today’s Market 360, we’ll take a few minutes to review what's happened with the stock lately. We’ll also discuss whether I think SMCI is still a good buy – and I'll also share how you can find other fundamentally superior stocks... One of My Favorite AI Stocks Now, before we get to what’s happened with the stock recently, we should talk about Super Micro Computer and what makes this company one of my favorite AI stocks.
Founded back in 1993, Super Micro Computer has been at the forefront of technological change, developing a lot of firsts in the industry: The very first x86 server boards based on Orion semiconductors, the first server boards to support Intel Pentium processors, the first redundant cooling power supply, the first dual Intel Xeon server – just to name a few!
Today, Super Micro Computer is well-known as a global leader in high-performance server technology solutions. The company provides a wide range of servers, storage, motherboards, workstations and networking solutions, as well as server management software. Its solutions are utilized in several markets, including 5G, Internet of Things (IoT), data centers, cloud computing, big data, enterprise, embedded and edge computing.
But what’s made the company one of the undisputed market leaders is the fact that its super-cooled server solutions are ideal for artificial intelligence applications.
If you’re looking to develop AI, you’re going to need a lot of computing power. That’s where NVIDIA Corporation’s (NVDA) chips come into play. But you’re also going to need the equipment that can handle it properly. And since all that computing power makes everything run hot, you’re also going to need to keep it cool. That’s where SMCI comes in.
The simple fact is that if you want fast servers for the cloud, then you need Super Micro Computer’s expertise. And since NVIDIA’s chips are in short supply, Super Micro Computer has a tremendous advantage. SMCI’s Wild Ride Now, SMCI had a tremendous start to the year, with the stock soaring 260% in the first quarter. Since then, though, shares have taken a breather. In fact, it’s down by about 23% in April so far – and that’s triggered a few questions about the stock.
First, let me say that some of the recent action is simply consolidation, which is normal. The stock just needed to digest these gains.
It’s also important to note that Super Micro Computer also has a 25.98% monthly standard deviation. The higher the standard deviation, the more volatile the stock. So, the swings in SMCI shares are likely to continue in the near term.
Now, with that being said, the stock has certainly taken investors on a wild ride – especially last week!  Early last week, the analyst community increased its price target on SMCI. Loop Capital more than doubled its price target, given increased confidence in the company’s share in the artificial intelligence server market. The analyst anticipates SMCI could soar to $1,500 per share, up from its previous target of $600.
SMCI shares soared more than 10% last Tuesday thanks to the positive outlook.
But most of these gains were erased by the end of the week, as the company announced that it had suspended any early pre-announcements. Without an early look at revenue results, some investors were concerned that Super Micro Computer’s third-quarter results may not be as robust as anticipated. As a result, the stock sold off by 23% on Friday.
In Super Micro Computer’s defense, its previous preannouncements were merely positive guidance that was understated relative to its actual earnings announcements. But now that Super Micro Computer is in the S&P 500, the company needs to be more responsible with its guidance. So, I don’t have a problem with the company’s revised guidance policies. Is SMCI Still a Good Buy? Now, my Accelerated Profits readers who followed our lead with SMCI are sitting on some tremendous gains. But the big question after this recent drop is... what happens next? Is it still a good buy?
Let me be clear: I view any dip in SMCI as a good buying opportunity.
And my Portfolio Grader tool agrees with me. It earns a Total Grade of A, making it a Strong Buy.  Looking ahead, Super Micro Computer plans to post results for its third quarter in fiscal year 2024 after the market closes next Tuesday, April 30. Third-quarter earnings are forecast to surge 258.3% year-over-year to $5.84 per share, up from $1.63 per share in the same quarter a year ago. Revenue is expected to soar more than 200% year-over-year to $4.01 billion.
Analysts have upped earnings estimates by 27.5% in the past three months. Typically, positive analyst revisions precede future earnings surprises. So, Super Micro Computer is on track for another stunning earnings announcement. How You Can Find the Next Market Leaders Folks, I know this recent volatility with SMCI has been uncomfortable. But it’s important to remember how far this stock has come...
We’re up more than 1,400% in less than two years with SMCI in our Accelerated Profits Buy List. And when it’s all said and done, I think it’s going to be a LOT more than that.
It’s important to remember that this stock has stunning fundamentals. And at the end of the day, fundamentally superior companies , i.e., the ones with strong earnings and sales growth, will emerge as the market leaders. This is why I only recommend fundamentally superior companies in all my premium services.
Super Micro Computer isn’t the only fundamentally superior company I like right now, either. My Accelerated Profits Buy List is chock-full of stocks that are well-positioned to climb higher and offer the potential for impressive profits.
That’s because the “secret sauce” behind our success is a financial superintelligence, which we harness to sift through the massive amount of data in the market according to our strict criteria.
To learn more about my Accelerated Profits service, including how we use our cutting edge A.I.-driven system to identify our picks, go here now.
(Already an Accelerated Profits member? Click here to log in to the members-only website now.) Sincerely, |
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