Super Micro Computer’s (NASDAQ: SMCI) stock price has wallowed near long-term lows because of sentiment and fears of financial misconduct. However, let’s face it: the Q2 results weren’t bad, and sentiment is rapidly improving because of a robust outlook. The results include some weaknesses, including guidance for the rest of the fiscal year, but each negative is offset by a positive, and there is an expectation that last year’s reports will soon be filed.
That is the primary risk; the reports are expected in February and can unleash a market ready to rocket higher or end the bull case scenario.
AI Drives Robust Outlook for Super Micro Computer
Super Micro Computer’s preliminary results —let’s not forget these were preliminary results until last year’s reports were filed— are tepid compared to the analyst consensus reported by MarketBeat. However, the miss is slim in light of the 54% year-over-year growth and outlook for AI advancement. The switch to NVIDIA’s (NASDAQ: NVDA) Blackwell from Hopper GPUs drives growth, with AI accounting for 70% of quarterly revenue.
Margin is another area of weakness offset by many positives. The company reported a decline in adjusted gross and operating margin due to mix and increased R&D, leaving EPS below consensus, but the miss is slim. The increased R&D is expected to pay off with new client wins, leading to margin recovery as the quarter's progress.
The guidance is mixed. The company is guiding for accelerating growth in 2025, but Q3 and full-year targets are tepid relative to analysts' forecasts. The good news is that executives forecast a 60% growth pace in 2025 and sustained it in 2026 and were confident in the outlook. GPU availability impacts results now but is expected to improve significantly by the year’s end.
Threat of Dilution No Problem for Super Micro Computer Investors
The company announced the issuance of $700 million in convertible notes and the preliminary report. The notes raise the risk of dilution, but terms assume a significant 50% upside from February 12th’s average weighted price, providing a favorable risk-reward scenario for investors. Regarding leverage, it is low. The company expects to report $1.9 billion in debt as of the end of last fiscal year, offset by $1.4 billion in cash, leaving leverage at roughly 1.35X the cash position. This is a solid position for the company, allowing it the flexibility to invest in growth initiatives and R&D to drive sales.
The sell-side interest in this stock is telling. The analysts’ sentiment dimmed in 2024, weighing heavily on the stock price, but is improving in 2025. The 2025 trend includes price target increases and upgrades compounded by expanding coverage. The number of analysts is up 350% since 2023, from four to seventeen, representing a robust influx of investor dollars.
Likewise, institutional investors, who own more than 80% of the stock collectively, are buying this semiconductor stock like mad. Their activity spiked to a multiyear high in Q1 2025, with numerous large purchases by prominent firms in the days leading up to the Q2 release.
Super Micro Computer Stock Price is Ready to Rebound
The market for SMCI stock is ready to rebound now that it is emerging from 2024’s troubles. The chart shows a skewed Head & Shoulders Pattern with a lower right shoulder, confirmed by market action. The post-release action has the market above critical resistance targets and at a two-month high, poised to move higher. The critical resistance targets are $49, $62, and $80, which may be reached quickly.
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