Super Micro Computer (NASDAQ:SMCI) shares have been on a wild ride thus far in 2024. After surging to a new all-time high in Q1 following the intense hype artificial intelligence brought to companies like Super Micro who are clear beneficiaries (a high of more than $120 per share), shares of SMCI stock fell to as low as $17.25 heading into the election as weak financial results and a short-seller report from Hindenburg Research hit the stock, alongside Department of Justice investigations.
However, since these events unfolded, Super Micro has since seen its stock price rebound more than 80% from lows seen just a few weeks ago. The company released a positive update from an independent committee on concerns surrounding the integrity of its previous filings, which clearly eased the minds of many investors. Additionally, Super Micro appointed BDO USA as its new auditor, and is prioritizing updating its financials as needed, though there may be little in the way of revisions (or revisions that may not be as bad as the market has feared).
Thus, this is a stock that appears like a binary bet to many investors. On the one hand, if these accounting related concerns can be proven to be overblown, there may be little reason to assert that this company’s rise to more than $120 per share wasn’t warranted, and the market could lift this stock higher in a short amount of time. On the other hand, if earnings don’t come in as expected and growth doesn’t show the kind of acceleration bulls are hoping for, this growth story could be unwound quickly.
Here’s the bull case behind why the odds may favor a move to triple-digit territory for SMCI stock in 2025.
Key Points About This Article:
- Super Micro has been among the most divisive stocks in the market this year, surging to a new all-time high before plummeting more than 90% from its peak in 2024.
- The near-term rebound we’ve seen in SMCI stock is encouraging, and there are plenty of bullish calls in the market from those who think this stock could be headed much higher from here.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Big Volatility Driving Interest from Traders
Volatility can be a trader’s best friend, and in that regard, Super Micro has been an excellent stock to follow from a price movement perspective over the past year. For longer-term investors like myself, such volatility is typically not welcome. But for those looking for an entry point in a company with serious growth potential, such moves can provide great opportunities over time.
Super Micro is a company I’ve been bullish on in the past mainly due to the company’s positioning in what I view as a high-growth market with long-term secular tailwinds. Super Micro is a leading AI infrastructure player, building modular energy-efficient server systems using Nvidia, AMD and Intel chips. With the company’s direct-liquid cooling (DLC) technology, these servers can remain submerged and utilize far less energy than other server farms, allowing for more and more powerful computing power to be used for next-generation AI technologies with the same underlying cost basis.
The rise of DLC technology in the server space has been incredible, and Super Micro has quickly gobbled up market share compared to its peers. The company now projects its FY2025 sales will come in around $6 billion, which is lower than where analysts had previously pegged this number, but would still value Super Micro at around 3-times sales given its current valuation. Accordingly, with the kind of growth potential Super Micro has, this valuation is one that certainly makes sense right now.
Price Predictions for 2025
Analyst price targets for Super Micro over the course of the next 12 to 18 months vary widely. That said, a $100 per share price target isn’t anywhere on the map, with the average price target for SMCI stock sitting at around $38.50 per share at the time of writing, and the high price target on the Street set at $67.50 per share. Accordingly, in order for SMCI stock to make the kind of move I’m calling for, most analysts on the street would be wrong.
I’m of the view that the volatility Super Micro has seen this year has led to over-exuberance in Q1 and likely a steeper-than-justified selloff during the latter part of this year. Of course, questions remain as to whether the accounting-related concerns brought up in Hindenburg’s short report will be proven correct over time. But it’s clear that given the wide variance in Super Micro’s forward estimates and price targets, even the most astute analysts don’t really have a handle on how this stock should be valued.
Situations like these are where I think most long-term investors can see the biggest potential gains. Sure, $100 per share may be a bit out there – but it’s possible. And right now, SMCI stock looks like it’s trading more as an option on the future. If the future is as bright as investors initially thought heading into 2024, then this is a stock that could (and probably should) eclipse this level once again at some point down the road, in my view.
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