Super Micro Computer (NASDAQ:SMCI) stock is experiencing a significant drop of almost 20% following the release of its fourth-quarter earnings report.
The company, known for its servers and storage solutions, saw a remarkable revenue increase of 143.6% to $5.31 billion, slightly surpassing analyst expectations of $5.30 billion. However, its adjusted EPS fell short at $6.25 compared to the estimated $8.07.
Despite this, Super Micro’s guidance for the upcoming quarters exceeded expectations. The company projected first-quarter revenue between $6 and $7 billion, higher than the analyst estimate of $5.46 billion. Additionally, for the fiscal year ending June 30, 2025, it anticipates revenue ranging from $26 to $30 billion, surpassing the estimated $23.4 billion.
CEO Charles Liang expressed confidence in the company’s future, stating, “We are well positioned to become the largest IT infrastructure company.”
Analysts Reduce Price Targets on SMCI Stock Due to Margin Concerns
One of the key factors leading to SMCI’s decline is its shrinking margins. Super Micro’s gross margin for the quarter was 11.2%, down from 17% a year ago and 15.5% in the previous quarter. This drop is attributed to increased competition from Dell (NYSE:DELL) and Hewlett Packard (NYSE:HPE), resulting in a higher cost of sales at $4.71 billion compared to $1.81 billion year-over-year.
Following the earnings report, Bank of America analyst Ruplu Bhattacharya lowered the price target to $700 from $1,090 and changed the rating to “neutral” from “buy.” Bhattacharya anticipates margin challenges for Super Micro in the near future due to various factors, including competitive pricing, delayed shipments, and supply chain issues.
Several other analysts also adjusted their price targets:
- Barclays: $693 from $1,000
- Goldman Sachs: $675 from $775
- Wells Fargo: $650 from $890
- Wedbush: $620 from $800
It’s important to stay informed about these developments and consider their potential impact on your investment decisions. Understanding the financial health and future prospects of companies like Super Micro Computer can help you make informed choices to secure your financial well-being.
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