Super Micro Computer, Inc. (SMCI) Is a Trending Stock: Facts to Know Before Betting on It

Super Micro Computer (SMCI) has gained significant attention as a trending stock recently. If you’re thinking of investing, it's important to consider several key factors that may impact its performance.

In the last month, shares of Super Micro have shown a remarkable increase of +12.6%, significantly outperforming the Zacks S&P 500 composite, which rose by only +2%. Within the Zacks Computer-Storage Devices sector—which encompasses Super Micro—the industry experienced a gain of 3.4%. This raises an important question: how might the stock perform moving forward?

Stocks often become trending due to news or rumors indicating notable changes in a company's business landscape, which can cause immediate fluctuations in price. However, underlying fundamental facts typically play a stronger role in long-term investment decisions.

Revisions to Earnings Estimates

One of the main aspects we focus on is the shifts in a company's projected earnings, as this often dictates the stock's fair value. Analysts usually revise their earnings expectations based on recent business trends. When these estimates increase, the fair value of the stock also rises, attracting more investors and leading to higher prices. Research has consistently shown a strong relationship between earnings estimate revisions and short-term stock price movements.

Currently, Super Micro is anticipated to report earnings of $0.75 per share this quarter, which reflects an impressive increase of +120.6% from the same quarter last year. Interestingly, this estimate has not changed in the past 30 days.

The outlook for the fiscal year is also positive, with a consensus earnings estimate of $3.35—a year-over-year increase of +51.6%, remaining stable over the last month. For the next fiscal year, the expectation of $4.11 indicates a +22.8% growth compared to the previous year, also unchanged in recent weeks.

Based on a well-constructed analysis tool, Super Micro currently holds a Zacks Rank of #2 (Buy), suggesting it may perform well in the short term due to these positive earnings revisions.

Projected Revenue Growth

When evaluating a company's potential, revenue growth is crucial. A company can only sustain earnings growth if it can also grow its revenues over time. Knowing Super Micro's projected revenue increases is essential.

For the current quarter, analysts expect Super Micro’s sales to reach $6.52 billion, marking a remarkable +207.5% rise from last year. Looking ahead, estimates for the following fiscal years predict revenues of $28.01 billion and $32.31 billion, translating to growth rates of +87.5% and +15.3%, respectively.

Last Reported Results and Surprise History

In its last reported quarter, Super Micro achieved revenues of $5.31 billion, up +143% from the previous year. The earnings per share (EPS) were $0.63, compared to $0.35 a year earlier.

Notably, this revenue figure exceeded the Zacks Consensus Estimate of $5.29 billion, reflecting a small positive surprise of +0.34%. However, the EPS fell short by -22.17% compared to consensus expectations.

Over the past four quarters, Super Micro has surpassed consensus EPS estimates in three instances and exceeded revenue estimates on three occasions as well, highlighting a consistent performance.

Valuation

No investment analysis is complete without assessing a stock's valuation. Understanding whether a stock's current price accurately reflects the true value of the company and its growth potential is crucial.

Investors can evaluate Super Micro's valuation by comparing its current price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) ratios to its historical values. This comparison helps to ascertain if the stock is reasonably valued, undervalued, or overvalued relative to its peers.

According to the Zacks Style Scores system, Super Micro has received a grade of C for Value, indicating that it is currently trading in line with its competitors. This assessment makes it easier for investors to determine whether it represents a good buying opportunity.

Bottom Line

The information outlined above can help guide investment considerations regarding Super Micro Computer, Inc. The current Zacks Rank of #2 suggests that this stock has the potential to outperform the broader market in the near future.

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