SMCI Stock: Supermicro Shows Strength In Tough Market

During a period when many businesses have struggled with their stocks down by double-digits, Super…

During a period when many businesses have struggled with their stocks down by double-digits, Super Micro Computer (SMCI) seems to be immune, as SMCI stock climbed 86% last year.




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When it reported fiscal first-quarter results in November, the company’s revenue of $1.8 billion beat its own prediction and jumped 79% from the year-ago period. It was the seventh consecutive quarter of accelerating growth from the year-ago period. Adjusted earnings soared an astounding 490%.

Investors cheered the results. SMCI stock broke out of a cup base in strong volume as the stock popped 12.5% to a 52-week high.

“Our business model has been optimized, our engineering teams are fully ready, and our worldwide campus production capacity and efficiency are now second to none,” Chief Executive Charles Liang said during the company’s conference call.

SMCI Stock: More Double-Digit Gains Expected

The company expects fiscal second-quarter revenue in the range of $1.7 billion to $1.8 billion. The midpoint of $1.75 billion represents a 50% increase year over year. It expects adjusted earnings of $2.64 to $2.90 a share. The midpoint of $2.77 represents a leap of 215% from the year-ago period.

The 29-year old company makes high-performance computer servers and storage systems, as well as motherboards, graphic processing units and networking products. It also provides server management software.

Legally known as Super Micro Computer, it also goes by the name Supermicro.

“We are emerging as one of the largest global suppliers of information technology solutions,” Liang said.

Partnerships With Intel, AMD, Nvidia

The company designs and builds computers for business customers who use them mostly in their data centers. It uses chips and hardware from Intel (INTC), AMD (AMD), Nvidia (NVDA) Broadcom (AVGO) and other Silicon Valley tech leaders.

Applications for its products include artificial intelligence, high-speed storage systems, 5G telco applications, cloud computing, the Internet of Things and the metaverse.

SMCI stock is one of the best performers in IBD’s Best 100 stocks of 2022.

Overall, the global market for information technology is forecast to grow 5% in 2023 to $4.65 trillion, according to research firm Gartner. In data center systems, where Supermicro gets a lot of its business, the field is expected to climb 3.4% to $216 billion.

Supermicro also is preparing to launch a line of next-generation products with its technology partners. These relationships with Intel, Nvidia and AMD gets Supermicro early access to designs that enable early shipments.

SMCI Stock: Large Opportunities Ahead

The company expects “many large opportunities,” such as with Intel’s upcoming Gen 4 processor chip, code-named Sapphire Rapids. Similar programs with AMD and Nvidia also have been established. This includes technology designed for emerging platforms known as the metaverse and omniverse, which are emerging technologies seen as the future of computer-based communications and architectures.

Supermicro also offers what it calls “green computing solutions.” It offers a lower total cost of ownership for data centers, while also increasing computing capacity per rack, the company said.

Supermicro generates 70% of its revenue from the U.S., driven by ongoing design wins from some of the top tier technology leaders. Asia represents 14% and Europe 13%.

For its fiscal year that ends June 30, Supermicro expects revenue in the range of $6.5 billion to $7.5 billion. It expects adjusted earnings in a range of $9 to $11.30 a share.

“I believe we will soon become a $20 billion revenue company,” said Liang.

Ranking First In IBD Industry Group

Supermicro ranks first in IBD’s Computer-Hardware/Peripherals industry group. Holding second is Logitech (LOGI) then Dell (DELL) and HP (HPQ).

super micro computerMoreover, Investor’s Business Daily finds just three sectors with top stocks worthy of a place on the IBD Sector Leaders list, which is a highly stringent screen. Of 11 major market groups, only the computer, semiconductor and medical sectors produced candidates that met IBD’s fundamental and technical criteria.

Supermicro made the cut, as well as chip stock KLA (KLAC) and Catalyst Pharmaceuticals (CPRX).

In addition, SMCI stock places seventh on the IBD 50 list of top performing companies. Also on Dec. 22, Supermicro joined the S&P 400 Midcap Index.

“We are off to a great start for fiscal 2023, and we expect our unprecedented growth momentum to continue,” said Liang.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.

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