Super Micro Computer Just Gave Its Investors Fantastic News
Key Points
Super Micro reports earnings next week, and it recently released preliminary numbers.
The company expects revenue to nearly quadruple.
It also expects its gross margin to rise to at least 12%.
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Super Micro Computer (NASDAQ:SMCI) has earnings coming up and is scheduled to release its first-quarter numbers for fiscal 2027 on Nov. 3. And last week, the company gave its investors some great news: its results are going to be better than expected, with both revenue and gross margins coming in considerably higher than what they previously forecasted.
The company, which has been an integral player in the data center build-out, selling crucial artificial intelligence (AI) infrastructure, including servers and storage solutions, has benefited from significant demand for its products in recent years. This year, it's up around 12%, and a strong quarter could potentially light a fire under this lowly valued tech stock.
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Revenue to be nearly four times what it was a year ago
Super Micro's upcoming quarterly results will be for the period ending Sept. 30. The company projects revenue in the range of $18.5 billion to $19.5 billion, a significant increase from its earlier guidance of $14.5 billion to $15.5 billion. Not only is that a big upgrade to the top line, but the tech company also expects its gross margins to be in the range of 12% to 12.5% -- higher than its previous projection of 10.4% to 10.8%.
These are extremely promising developments for investors for a couple of reasons. The first is the sheer growth. At $19 billion, the mid-point of its revenue forecast would mean that its top line will be nearly quadruple the $5 billion it generated a year ago. Margins have also been a key concern for investors, and if they are improving yet again, it's another encouraging sign that the business is making progress in the right direction.
Is Super Micro stock a steal of a deal?
Although Super Micro is experiencing significant growth, the stock itself isn't that expensive. Based on analyst projections, it's trading at a forward price-to-earnings multiple of just eight. The company has had accounting issues and governance concerns hanging over it in recent years, which may partially explain why the stock isn't trading at a higher valuation. Plus, there are concerns that a tech bubble has formed, and if demand for servers and other AI infrastructure slows, there could be significant headwinds for the stock.
Super Micro's growth has been volatile in recent years, and while it looks tremendous right now, investors should consider the stock's track record before buying it. For those comfortable with risk and uncertainty, it may be worth buying Super Micro stock given its low valuation, but for more risk-averse investors, the safer option may be to take a wait-and-see approach for the time being.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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