Super Micro Computer (NASDAQ: SMCI) has been one of the biggest winners of the artificial intelligence (AI) boom.
Even after the pullback in recent months, Supermicro, as the company is also known, is still up nearly 700% from the start of 2023, nearly matching Nvidia as the chart below shows.
SMCI Chart
The company, which makes high-density servers that are particularly well suited to running AI applications, has accomplished that by putting up Nvidia-like growth numbers with revenue jumping 144% in its recently reported fiscal-fourth quarter.
In response to the stock surge, Supermicro recently decided to reward investors with a 10-for-1 stock split, which goes into effect on Oct. 1. The company said it was splitting the stock to make it more accessible.
Should you buy Super Micro Computer before the stock split? Let’s take a look at the evidence.
Image source: Getty Images.
Recent performance is mixed
There’s no question that Supermicro is experiencing surging growth, but there’s been a blemish on the company’s record, and it’s one reason the stock tumbled after the recent earnings report. Gross margin has been falling even as revenue has surged. In the fourth quarter, the company reported a gross margin of just 11.2%, down from 17% in the quarter a year ago. That translated into lower operating margins for Supermicro as well, falling to 6.5% from 10.3%.
The good news is that the company expects gross margin to recover, saying that supply chain bottlenecks have driven up prices for new components, but that should recede over the next year. Management also said that long-term gross margins will benefit from lower manufacturing costs in production in Malaysia and Taiwan. It also plans to expand in the Americas and in Europe.
If margins recover next year, the stock should move higher.
Will the stock split help?
Investors should understand that a stock split doesn’t do anything to change the fundamental value of a stock; it just divides the proverbial pie into more pieces, making individual shares cheaper.
There’s also some evidence that stocks have outperformed the S&P 500…
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