Goldman Sachs starts Super Micro stock at Neutral, noting key AI partnerships
Investing.com | Editor Emilio Ghigini
Published Mar 04, 2024 05:18AM ET
On Monday, Goldman Sachs began coverage on Super Micro Computer (NASDAQ:SMCI), a supplier of high-performance server and storage systems, assigning a Neutral rating and a price target of $941. The firm highlighted Super Micro Computer's transformation into a significant player in AI infrastructure, leveraging partnerships with key AI component suppliers such as NVIDIA (NASDAQ:NVDA), AMD (NASDAQ:AMD), and Intel (NASDAQ:INTC).
Super Micro Computer's customer base includes major GPU-specialized cloud-service providers investing in AI infrastructure. The company's revenue and earnings have seen a significant uptick in the past two years, paralleling NVIDIA's performance. This surge has supported the stock's dramatic increase, which has seen nearly a 1,000% rise since the start of 2023.
The escalation in Super Micro's stock value was attributed to a tripling in earnings and an expansion of its price-to-earnings (P/E) multiple to 32 times next twelve months (NTM) earnings, aligning it with other AI industry enablers. Goldman Sachs noted that at this P/E ratio, Super Micro trades in line with NVIDIA, which also stands at a 32 times NTM P/E ratio.
Looking forward, Goldman Sachs anticipates a deceleration in Super Micro's revenue growth, forecasting a drop from a 61% three-year compounded annual growth rate (CAGR) for the period from fiscal year 2021 to the estimated fiscal year 2024, to 51% year-over-year in fiscal year 2025, and then to 9% in subsequent years. Despite Super Micro's strong positioning to meet AI cloud service providers' demands in the near term, the firm expects heightened competition in serving enterprise AI infrastructure needs later on. This will likely stem from more enterprise-focused IT hardware suppliers such as Dell Technologies (NYSE:NYSE:DELL) and Cisco Systems (NASDAQ:CSCO).
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