Super Micro Computer Stock (NASDAQ:SMCI): The Sell-Off Is Overdone

Super Micro Computer (SMCI), a provider of high-performance computing and AI infrastructure solutions, has seen its stock experience significant volatility. The AI infrastructure company’s stock went parabolic in January 2024, only to crash after it joined the S&P 500 (SPX). While a correction was warranted, it’s a bit overextended now, especially with the recent impressive revenue guidance. I am bullish on Super Micro due to its lower price point and promising catalysts.

Analyzing the Earnings Report

Super Micro closed out Fiscal 2024 with soaring sales and promising guidance for the future. The company delivered $5.31 billion in quarterly revenue compared to $2.18 billion in the same quarter last year, a 143% increase. Additionally, net income increased by 82% year-over-year to reach $353 million.

Those results are good, but investors got nervous about narrow profit margins. For context, Super Micro’s net income was $402 million in Q3 FY24, indicating a sequential decline of 12%. Meanwhile, the AI beneficiary reported $3.85 billion in Q3 FY24 revenue, meaning that Q4 revenue saw a 38% sequential increase.

Profit margins should continue to narrow in Fiscal 2025, which prompted the excessive sell-off. Not even a 10-for-1 stock split could dissuade investors from rushing for the exits.

However, the guidance makes it hard to justify how far the stock has fallen. Super Micro anticipates Fiscal 2025 revenue ranging from $26.0 billion to $30.0 billion, compared to $14.94 billion in Fiscal 2024 revenue. Guidance suggests that revenue can more than double year-over-year (at the high end of the range), especially with Super Micro’s tendency to beat top-line expectations.

While the company didn’t offer guidance for net income, it should once again grow year-over-year. The question is, by how much? Regardless, even if net income growth decelerates to 30-50% year-over-year, it still presents a good long-term opportunity.