Why Super Micro Computer Stock Rocketed to New Highs This Week
Week to date, shares of Super Micro Computer (NASDAQ: SMCI) were up 23% through Thursday's market close, according to data provided by S&P Global Market Intelligence. The demand for artificial intelligence (AI)-driven computing is driving accelerating revenue growth and profits for this leading supplier of rack-scale solutions for data centers.
Despite the stock's massive run over the last year, the company is seeing market share gains for its products and raised full-year revenue guidance.
Why Super Micro Computer revenue was up more than 100% in the fiscal second quarter
In the company's fiscal 2023 annual report, CEO Charles Liang said the ongoing growth in AI computing could be potentially more impactful to the world than the industrial revolution over 200 years ago. His company is certainly growing like it. Earlier this week, Super Micro reported a record $3.66 billion in revenue for the fiscal second quarter ending Dec. 31, a year-over-year increase of 103%.
The company continues to benefit from the demand for Nvidia's graphics processing units (GPUs), so as those chips are coming into better supply, it is driving more sales of Super Micro's rack systems for AI.
Management expects fiscal 2024 revenue to double to between $14.3 billion to $14.7 billion "With AI applications booming, I expect the $20 billion annual revenue target to be just a few years away," Liang said in his annual letter to shareholders last year.
Why the stock has room to run
Despite rocketing 700% over the last 12 months, the stock is still reasonably priced. It reported adjusted earnings per share of $5.59, up from $3.26 in the same quarter last year. That's an annual run rate of $22.36, which gives a forward price-to-earnings ratio of 25.9.
Given that fair valuation, Super Micro's run is likely not over.
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John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Super Micro Computer. The Motley Fool has a disclosure policy.
