shares Super micro computer (NASDAQ: SMCI) And Intuit (NASDAQ:INTO) They have risen by 10,740% and 2,220%, respectively, over the past 15 years. This price rise qualifies the two companies as candidates for a stock split in 2024. More importantly, it tells investors that both companies must be doing something right. This kind of outperformance doesn't happen by chance, and winners tend to keep winning. Famous investor Peter Lynch once said: “You want to let the winners run.”
That's why Supermicro and Intuit are worthwhile investments whether the companies do a stock split this year or not.
Super Micro Computer: Market leader in AI servers
Super Micro Computer builds high-performance servers and storage systems for enterprise data centers and the cloud. Its products range from single devices to complete rack-scale solutions. The company sources chips, memory, interconnects and other hardware from suppliers such as Intel Corporation And AMDand has a particularly close relationship with Nvidia.
Supermicro has distinguished itself through modular product development and in-house engineering. Specifically, it creates server building blocks that can be quickly outfitted with advanced chips and hardware, and handles most of the design and manufacturing in-house. These qualities often allow Supermicro to bring new products to market before their counterparts. In fact, management expects to be first to market for computing platforms featuring the latest Nvidia Blackwell graphics processing units (GPUs).
Another benefit of developing modular products is that server building blocks can be assembled into countless combinations, so that Supermicro generally offers a wider range of server and storage products than its counterparts. In other words, the company provides its customers with more flexibility in designing custom computing solutions.
Supermicro is by no means the leader in the server space. Dell Technologies It has this title. But the company took the lead early on Artificial Intelligence (AI) The server market is rapidly gaining market share. Analysts at KeyBanc estimate that the company will account for 23% of AI server sales by the end of 2024, up from 10% at the beginning of the year.
Supermicro reported strong financial results in the third quarter of fiscal 2024 (ending March 31). Revenue increased 200% to $3.8 billion due to particularly strong demand for GPU-accelerated AI platforms, and Non-GAAP (GAAP) Net income rose 308% to $6.65 per diluted share. Management also raised its full-year guidance, forecasting a 110% revenue increase at the midpoint, up from 104%.
Going forward, Wall Street expects Supermicro's earnings per share to grow 47% annually over the next three to five years. If we divide that number into a current price-to-earnings ratio of 40.5 times non-GAAP earnings, the result is a very reasonable price/earnings-to-growth (PEG) ratio of 0.9. At this price, I think Supermicro is well positioned to outperform Standard & Poor's 500 During the next three to five years.
Intuit: an expert platform based on artificial intelligence
Intuit is the market leader in US tax preparation (TurboTax) and accounting software (QuickBooks). It also owns personal finance platform Credit Karma and marketing platform Mailchimp. Five years ago, Intuit began redefining itself as an AI-driven expert platform and redoubled its efforts in expanding its small business ecosystem with adjacent services, such as payroll and payment processing.
Since then, Intuit has launched live versions of TurboTax and QuickBooks, allowing users to interact with tax and bookkeeping experts. The company also introduced an AI assistant (Intuit Assist) that answers tax questions and makes recommendations in TurboTax, highlights financial insights in QuickBooks, and helps small businesses optimize marketing campaigns in Mailchimp. When appropriate, Intuit Assist also directs users toward assisted and full-service tax preparation and bookkeeping solutions.
Intuit looked strong in the third quarter of fiscal 2024 (ending April 30), beating expectations at the top and bottom line. Revenue rose 12% to $6.7 billion, an acceleration from 7% growth the previous year. This is due to particularly good numbers in the Small Business and Self-Employed product category, which includes Mailchimp, QuickBooks and related services. Meanwhile, non-GAAP net income increased 11% to $9.88 per diluted share.
Management also raised its guidance for the full year. Revenue is now expected to rise 13%, from 11% to 12%, reflecting a more confident outlook across all product categories, especially the small business and self-employed segment. Additionally, non-GAAP earnings per share are expected to increase 17%, from 12% to 14%.
Going forward, Wall Street expects Intuit's earnings per share to grow 17% annually over the next three to five years. This makes its current valuation of 34.5 times non-GAAP earnings seem reasonable. Additionally, shares currently trade at 32.1 times free cash flow, which is a discount to the three-year average of 37.3 times free cash flow.
Intuit has lagged the S&P 500 by a margin over the past three years, but I believe the stock can beat its current valuation over the next three to five years.
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Trevor Genuine He has positions at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intuit, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has Disclosure policy.
Potential Stock Splits in 2024: Artificial Intelligence (AI) Stocks Up 2,220% and 10,740% in 15 Years Buy Now Originally published by The Motley Fool