$SUPER MICRO COMPUTER INC(SMCI)$ is scheduled to report its fiscal fourth quarter results on 06 August (Tuesday) after the market close.
SMCI makes products such as rackmount servers and graphics processing unit (GPU) servers, motherboards and chassis, and ethernet switches, but the most important is its capability of making artificial intelligence servers.
In the last quarterly report, its revenue tripled from a year ago, driven by demand for its artificial intelligence servers, and raised its full-year revenue guidance.
With the continued expansion of data center demand, SMCI should be able to see more businesses in U.S. and also Asia Pacific where there have been big tech names coming to Asia and South East Asia in particular to host their services in data center here.
Market is expecting SMCI to post EPS of $8.1 on revenue of $5.31 billion for the quarter.
Riding On the AI Demand and Data Center Growth
SMCI’s data center rack scale solutions offer some of the fastest linear processing speeds on the market, though they’re not publicly available from the company.
This can be served as their competitive advantage as they would be able to ride on the spike in demand for its Nvidia-supported data center computers. But there have been signs of demand drying up as seen in Nvidia share price as enterprise are now evaluating the return of investment to AI.
But if we were to look at the overall demand growth for data center, because enterprises and big tech names are already building their own chips, so this might be good news for SMCI for its data center rack scale solutions.
The global data center market size was USD 229.23 billion in 2023, calculated at USD 256.05 billion in 2024 and is expected to reach around USD 775.73 billion by 2034, expanding at a CAGR of 11.72% from 2024 to 2034.
Asia-Pacific is expected to grow the fastest during the forecast period. SMCI revenue from Asia Pacific should be an area of focus for this upcoming quarterly earnings.
Revenue contribution should still come from its key market, U.S., but there might be a significant growth in the Asia Pacific market for SMCI.
I will be watching closely on its guidance for rest of 2024 as semiconductor sector are now facing challenges from delay in production, will SMCI show that they are on target for their deliveries?
SMCI Price Target Forecast
Based on 11 Wall Street analysts offering 12 month price targets for Super Micro Computer in the last 3 months. The average price target is $978.50 with a high forecast of $1,500.00 and a low forecast of $325.00. The average price target represents a 60.72% change from the last price of $608.83.
If we were to look at SMCI price movement, there have been some correction recently, and it is trading around $600 which is quite far from its average target price of $978.50.
But will SMCI be like Nvidia to create a surge in its stock price with a tremendous earning showing? I think there will be some challenge to its data center solution business with more smaller incumbent.
SMCI Impressive Returns On Its Stock Price
SMCI have given investors an impressive more than 100% returns on its stock price. But will it continue to move higher towards the $900?
It is very much depend on whether SMCI would be opening up its data center rack solution to other chip maker, as they are currently serving GPU from Nvidia.
Technical (MACD and KDJ)
From the downtrend presented by MACD, it looks like market is still worried about the impact of weakness from the semiconductor sector, so we might see SMCI not making too much a movement.
Though we can see that KDJ is suggesting a potential upside move with potential BUY signal appearing, I would think I will monitoring the price action on SMCI today (06 August).
Summary
SMCI earnings could be significant given the AI demand and demand for data center from other chip maker, but the weakness from semiconductor sector might have some impact on how SMCI shares could move after its earnings.
So I would be looking out for SMCI guidance and outlook for 2024, and how SMCI would be planning to capture the bigger market in Asia Pacific where data center demand is set to grow.
Appreciate if you could share your thoughts in the comment section whether you think SMCI would provide an impressive guidance and outlook like the previous quarter?
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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