TLDR:
- Super Micro stock fell 3% Thursday after rising 16% the previous day
- Raymond James initiated coverage with an “Outperform” rating and $41 price target
- SMCI announced a $20 billion deal with Saudi Arabian data center company DataVolt
- Analyst sentiment has improved with 47% now rating it “Buy” compared to 25% six months ago
- The company has faced challenges including a DOJ investigation and accounting questions
Super Micro Computer shares took a breather Thursday, falling 3% in premarket trading after surging 16% the day before. The AI server maker has been on a wild ride lately, with shares up 50% year-to-date despite facing headwinds from accounting concerns and investigations.
The recent rally was sparked by Raymond James analyst Simon Leopold, who initiated coverage with an “Outperform” rating and a $41 price target. This represents over 20% upside from Monday’s opening price of $33.89.
Leopold described Super Micro as a market leader in AI infrastructure. He noted the company offers competitive pricing compared to its peers in the sector.
The analyst positioned Super Micro in the “sweet spot” between other IT suppliers in the AI space, such as Dell and Hewlett-Packard. This middle-ground positioning has caught investors’ attention.
Major Saudi Deal Boosts Outlook
Super Micro announced a massive $20 billion deal with Saudi Arabian data center company DataVolt on Wednesday. This agreement significantly improves visibility on future shipments and results.
However, Leopold cautioned that the timing of the deal remains uncertain. This detail didn’t dampen investor enthusiasm as the stock jumped on the news.
The Saudi deal represents a major vote of confidence in Super Micro’s technology and business model. It comes at a critical time as the company works to move past earlier concerns.
The server maker has faced several challenges over the past year. These included a Department of Justice investigation and questions about its accounting practices.
Analyst Sentiment Improving
Analyst sentiment toward Super Micro has markedly improved in recent months. According to FactSet, 47% of analysts covering the stock now rate it as “Buy” or equivalent.
This is a substantial improvement from six months ago when only 25% rated it a “Buy” while 25% recommended selling. The average “Buy” rating for S&P 500 companies is 55%.
Only 13% of analysts now have a “Sell” rating on the stock. This shift suggests growing confidence in Super Micro’s business prospects and governance.
Super Micro’s stock has been volatile following several setbacks. The company missed earnings expectations and saw a 72% decline in net income in the first quarter despite beating revenue estimates.
EY, the company’s previous auditor, resigned last year. This raised red flags about the firm’s financial reporting.
Short-seller Hindenburg Research had previously claimed it found “glaring accounting red flags” in Super Micro’s bookkeeping. Hindenburg has since closed its operations.
In February, Super Micro’s new auditor, BDO, approved the company’s financial statements. The company has also stated that an independent investigation found no evidence of fraud or misconduct.
Super Micro’s strong presence in the US market may provide some insulation from tariff impacts compared to other chipmakers. This geographic advantage was highlighted by Raymond James analysts.
SMCI shares closed at their highest level since February in Wednesday’s session. The stock has experienced a two-day gain of up to 36% this week.
The stock’s recovery comes as demand for AI infrastructure continues to grow. Super Micro’s specialized servers cater to the computing needs of AI applications.
Despite Thursday’s pullback, the stock has exhibited strong momentum. Trading at $43.67 in premarket activity, it remains well above recent lows.
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