Super Micro Updates Fiscal Guidance As Nvidia Shifts, 4 Analysts Provide Perspectives

Wedbush analyst Matt Bryson maintained Super Micro Computer Inc SMCI with a Neutral rating and raised the price target from $530 to $800.

Bryson noted that Supermicro guided revenues for the year meaningfully higher, suggesting sales momentum is only accelerating into the fiscal fourth quarter. At the same time, the midpoint of management’s guidance implicitly suggests gross margin deterioration of ~200 bps and an operating margin decline of ~100 bps.

The expected dip in margins, in turn, necessarily caters to concerns about how competition might weigh on SMCI’s ability to translate AI-related server growth into profit, both in the current quarter and moving forward, the analyst said. The result mirrors the dichotomy that has kept him on the sidelines regarding SMCI over the past 12 months. 

SMCI has successfully changed its narrative from that of a scrappy underdog supplying customers with cheaper and more customized solutions to the leading OEM of AI servers.

SMCI sales momentum is unlikely to diminish over the next few quarters as Nvidia Corp’s NVDA offerings transition to H200 and Blackwell. However, the analyst continues to see the server market as competitive.

Bryson projected fourth-quarter revenue of $5.30 billion (prior $4.81 billion) and EPS of $8.09 (prior $7.04).

BofA Securities analyst Ruplu Bhattacharya reiterated a Buy rating on SMCI with a price target of $1,090.

Super Micro reported fiscal third-quarter revenue slightly below consensus. The analyst noted that the small topline miss was driven by a lack of component availability late in the quarter. 

Bhattacharya’s bullish thesis remains intact, as the company is expected to significantly exceed consensus forecasts for the June quarter. SMCI is on course to achieve production of over 2,000 direct-to-chip (DTC) liquid-cooled racks monthly by quarter’s end, and the introduction of GB200 solutions in fiscal 2025 is anticipated to increase the average selling price per system.

SMCI is also poised to expand its market by serving additional chip vendors beyond Nvidia. The company continues to see strong demand from Tier-2 CSPs and enterprises and is positioned to capitalize on upcoming sovereign AI demand.

Super Micro remains a pure-play AI server vendor, and Bhattacharya expects continued positive estimate revisions in the long term.

Bhattacharya projected fourth-quarter revenue of $5.30 billion and EPS of $8.10.

Goldman Sachs analyst Michael Ng reiterated a Neutral rating on SMCI with a price target of $800, down from the prior $937.

Ng’s price target cut reflects increasing uncertainty around SMCI’s AI server market share.

SMCI’s fiscal third-quarter results were largely as expected, with revenue of $3.85 billion (v. consensus of $3.96 billion), gross profit of $601 million (v. consensus of $593 million), and increased fiscal 2024 revenue guidance to $14.7 billion—$15.1 billion, which implies $5.1 billion—$5.5 billion for the fiscal fourth-quarter, Ng noted. 

While the potential margin dilutive impact from AI server sales and competition is a concern, SMCI reiterated its long-term 14% – 17% gross margin target. Ng noted that elevated product costs from liquid cooling should normalize over time. Separately, SMCI said it could need additional capital to support growth.

Encouragingly, demand appears strong, as evidenced by SMCI achieving a record backlog, Ng added.

Ng projected fourth-quarter revenue of $5.27 billion and EPS of $8.08.

JP Morgan analyst Samik Chatterjee reiterated an Overweight rating on SMCI with a price target of $1,150.

Chatterjee identified two main concerns reflected in the company’s share price. Firstly, there are worries about gross margins. The company predicts these will be within the long-term range of 14%-17% for the fiscal fourth quarter.

However, the guidance suggests that margins will be at the lower end of this range, which follows a gross margin of 15.6% in the fiscal third quarter. This raises concerns about the company’s willingness to sacrifice margins to pursue revenue growth.

Secondly, there’s the issue of potential capital raises. While the company has stated it has sufficient capital to manage growth of 20%-30%, achieving higher growth rates as projected will require additional capital. This is necessary to meet the inventory requirements for reliably servicing customers.

With demand continuing strong, investors are now grappling with the challenge of how further capital raises might dilute earnings.

Chatterjee projected fourth-quarter revenue of $5.30 billion and EPS of $8.11.

Super Micro Computer stock gained 591% in the last 12 months. Investors can gain exposure to the stock via Invesco S&P MidCap Momentum ETF XMMO and IShares U.S. Digital Infrastructure And Real Estate ETF IDGT.

Price Action: SMCI shares were down 11.8% at $757.01 at last check Wednesday.

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