On Wednesday, Argus initiated coverage on Super Micro Computer (NASDAQ:SMCI), assigning a Buy rating to the company's stock with a price target of $1,350. The firm recognized Super Micro as a key player in the generative AI era, citing its comprehensive range of computer and server solutions.
Super Micro's offerings include rack and blade servers for various applications such as cloud, enterprise, data centers, and GPU-based systems designed for deep learning and high-performance computing.
Super Micro has reported a significant acceleration in revenue and earnings growth, driven by increasing demand for its server and computing solutions. The company has been growing its earnings at an average annual rate of 53%, outpacing the tech industry's growth, which is in the low double-digit percentages.
For the fiscal year 2023, Super Micro announced a 37% year-over-year revenue growth, a figure that CEO Charles Liang believes affirms the company's leading position in AI-accelerated computing platforms.
The demand for generative AI has led to a surge in the need for advanced applications, which Super Micro's optimized rack-scale solutions are designed to meet. The company is on a trajectory to achieve over 100% revenue growth for the fiscal year 2024.
Despite a significant rise in the company's stock price, valuations remain reasonable according to Argus. The firm compares Super Micro's growth pattern to that of industry giants such as Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Nvidia (NASDAQ:NVDA), noting that the company's revenues are increasing at a much faster rate than its costs.
Argus highlights the substantial operating leverage Super Micro enjoys due to its rapidly expanding sales base. This leverage is contributing to margin expansion and a swift acceleration in earnings per share (EPS).
While acknowledging that Super Micro's shares are not cheap, Argus believes the company's prospects for both near-term and long-term growth warrant investment at the current price levels. The 12-month price target reflects the firm's confidence in the stock's future performance, and Argus maintains a long-term Buy rating for Super Micro Computer.
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