It’s time to buy Super Micro Computer after its latest earnings results on the strength of its artificial intelligence outlook, according to Loop. Analyst Ananda Baruah hiked his price target to $150 from $100. The new price target implies shares can jump 43% from Tuesday’s closing price of $104.43. Shares gained 28% on Wednesday, and they’re up 63% in 2023. The price target hike comes after Super Micro Computer reported results from its latest quarter. The server technology firm missed analysts’ third-quarter expectations, according to FactSet. However, it issued upbeat fourth-quarter guidance. The company expects artificial intelligence will help supercharge growth. SMCI 1D mountain Super Micro Computer shares 1-day “With applications like ChatGPT, that heavily count on large language model LLM and generative AI, the state of AI infrastructure business has grown rapidly,” CEO Charles Liang said Tuesday during the earnings call. “This AI moment has benefited Supermicro greatly, as we are deploying many orders leading and large-scale GPU clusters,” Liang added. Investors were encouraged by the rosy outlook. Super Micro Computer forecasts per-share adjusted earnings between $2.21 and $2.71 in its fourth quarter, greater than the $1.76 consensus estimate from FactSet. It expects to post revenue between $1.7 and $1.9 billion, more than the $1.64 billion estimate. That helped traders overlook disappointing third-quarter results, with CEO Liang citing component shortages for the miss. Super Micro Computer posted adjusted earnings of $1.63 per share on revenue of $1.28 billion. Analysts polled by FactSet anticipated earnings of $1.71 per share on revenue of $1.39 billion. “On its Mar Q EPS call SMCI laid out a path to sustainable growth in its AI business over the next 4-6 Q’s (and frankly beyond, as they reiterated their goal of $10B – $20B in revenue over time …. SMCI continues to guide FY2024 (June) revenue up ‘at least 20%,’ which would be a stock catalyst in and of itself,” Baruah wrote in a Wednesday note. “That being said, with AI increasingly a part of the story (essentially 20 – 30% of revenue and perhaps growing), Cloud revenue perhaps closing in on at least 50% of revenue (top 20 – 30 Cloud Service Providers) and an opportunity for an expanding margin structure we believe a changing narrative (AI / Cloud) that investors are increasingly enthused about could (gulp) lead to material P/E expansion as well,” Baruah added. Specifically, the analyst said the firm’s data center business appears to be expanding, and pointed to the strength of its partnerships with cloud businesses such as Microsoft Azure, Amazon Web Services, Google Cloud and Meta. —CNBC’s Michael Bloom contributed to this report.
