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SMCI stock could surge 70% from here - Loop Capital

Published 04/16/2024, 08:58 AM
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A new research note from Loop Capital suggests Super Micro Computer Inc (NASDAQ:SMCI) stock's impressive rally may have further room to run. Loop Capital assigns a significantly higher price target to SMCI stock, indicating a potential surge of 70%. This comes on the heels of a strong year for SMCI, which has positioned itself as a leader in the rapidly growing AI server market.

The stock is up more than 215% this year and 715% over the last 12 months as the demand for high-performance computing power for AI applications has surged. Super Micro Computer is a leading manufacturer of servers specifically designed for AI workloads. This strong demand from data centers and institutions has fueled investor optimism in SMCI.

In a note to clients Monday, analysts at Barclays expressed their bullishness on SMCI shares when previewing the stock’s upcoming results. They expect a strong print from the company, adding that its guidance should "easily beat the Street."

"While it is difficult to assess the probability of a positive preA in the coming week, we think June-Q guidance should be very strong, led by Tesla (NASDAQ:TSLA) (Musk Inc.) and Tier 2 Cloud," wrote Barclays.

SMCI’s March quarter revenue is said to be tracking at the high end of guidance.

Elsewhere, JPMorgan started SMCI at Overweight in a note last month, stating that the compute cycle is at the forefront of the AI revolution.

“Super Micro is the leading company in the AI compute market, which is burgeoning with demand stemming from training AI models, RetrievalAugmented Generation by Tier 2 CSPs and Enterprises, and eventually AI inferencing workloads,” said JPMorgan analysts.

It is expected that SMCI’s leadership will continue, led by a balance of custom built solutions and fast time to market. Even so, the investment bank notes that the potential upside is more likely from rapid expansion in the AI Server market rather than expansion of the already premium valuation multiple.

Loop Capital boosts SMCI stock target

The recent analyst bullishness is shared by Loop Capital, which raised its target for SMCI to $1,500 in a note Tuesday, maintaining a Buy rating on the stock. The firm continues to gain confidence in both its net-bullish generative AI server industry posture and SMCI as an increasing leader in the need for both complexity and scale.

“We believe valuation (P/E) will remain a conversation point and believe if our fundamental thesis has teeth a 20x – 30x P/E is maintainable,” Loop Capital stated.

Their analysis suggests business remains very healthy for SMCI, and like analysts at Barclays, they are anticipating robust March quarter results and a strong June guide. In addition, Loop Capital feels the long-term revenue potential for the company continues to be underappreciated

More specifically, now that SMCI is in the S&P 500, Loop Capital said it is having regular conversations with “large long-only’s” expressing the view that 20x to 30x makes sense for a leader in a structural build-out dynamic such as Gen AI.

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