Super Micro Computer, Inc.

SMCI Details

Super Micro Computer, Inc. (NASDAQ: SMCI) is a global provider of efficient, high-performance server and storage technology solutions for enterprise data centers, cloud computing, artificial intelligence, and edge computing systems. Its portfolio ranges from servers, storage, blade and workstations to full racks, networking devices, server management software and technology support and services.

Latest News:

• New Product Offerings: On October 12, 2021, SMCI launched new systems under its Supermicro X12 series based on the trademark NVIDIA Ampere architecture GPUs and 3rd Gen Intel Xeon Scalable processors. The servers can withstand complex AI applications that require low latency and high performance.

Q1FY22 Results:

• Robust Growth in Revenue: The company recorded a substantial 35.48% increase in net sales to USD 1.03 billion in Q1FY22 (ended September 30, 2021) compared to USD 762.25 million in Q1FY21.
• Slight Decline in Net Income: Its Q1FY22 net income was USD 25.44 million, slightly lower than USD 26.60 million reported in Q1FY21, owing to increased research and development (R&D) expenses.
• Decent Balance Sheet: SMCI exited the quarter with a cash balance of USD 270.05 million and total debt of USD 278.81 million.

Key Risks: 

• Competition Risk: SMCI is in the server and storage solution business, and it faces direct competition from global technology companies like Cisco, Dell, Hewlett-Packard Enterprise, and others, as well as application-optimized server vendors like Inspur, Quanta Computer, and Wiwynn. In recent years, fierce pricing rivalry has dragged down market prices for many of the company's items. If this pattern continues, the company's financials may suffer.

Outlook:

• Q2FY22 Estimates: In its Q1FY22 earnings release, SMCI stated that it expects its Q2FY22 revenue to range between USD 1.1 – 1.2 billion, with GAAP and non-GAAP EPS ranging from USD 0.60 – 0.80 and USD 0.70 – 0.90, respectively.
• FY22 Guidance: The estimated FY22 revenue range is USD 4.2 – 4.6 billion, with GAAP EPS of USD 2.77 (USD 3.20 on a non-GAAP basis).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SMCI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

SMCI's share price has surged 28.19% in the past week and is currently close to the higher end of its 52-week range of USD 27.53 to USD 47.14. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 85.13, indicating an overbought zone. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 42.47.

Considering the significant uptick in the stock price in a short period, current valuation, and other technical indicators, we believe the decent business fundamentals are sufficiently reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 46.98, up 0.86% as of November 08, 2021, 9:53 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV. 

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.