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Shares of Super Micro Computer (NASDAQ:SMCI) on Friday were on track for their worst day since early August last year, as the stock appeared to finally take a breather following a breathtaking rally.
Since reporting preliminary FQ2 2024 results on January 18, investors have flocked to SMCI stock, sending it on a spectacular run that came to a head on Thursday with it hitting an all-time intraday high of $1,006.35. That represented a whopping 223.1% gain from SMCI’s closing price of $311.44 on January 18.
On Friday, Super Micro (SMCI) was last down 17.9% to $824 in afternoon trade.
San Jose, Calif.-based Super Micro (SMCI) makes products such as rackmount servers and graphics processing unit (GPU) servers, motherboards and chassis, and ethernet switches and adapters.
One of the biggest drivers of SMCI’s run has been its revenue potential in artificial intelligence (AI) servers. Strong customer demand for its AI servers was the primary reason for the company bumping up its FQ2 sales and profit guidance in its preliminary results announcement on January 18.
Later, on January 29, its earnings report showed that Super Micro (SMCI) slightly topped its preliminary numbers. Moreover, its current quarter revenue guidance came in significantly above estimates.
SMCI stock hit record highs after both the preliminary announcement and the final results, with analysts heaping praise on the firm.
On Friday, Wells Fargo initiated coverage on the stock with an Equal Weight rating and a price target of $960.
“SMCI’s AI-fueled fundamental momentum, underpinned by engineering-first differentiation, has been nothing less than remarkable and should support some sustainable valuation re-rate,” Wells Fargo analyst Aaron Rakers said. “We are positive on Super Micro’s (SMCI) ability to continue to be a meaningful player in the ongoing AI server investment cycle.”
“However, we think that investor sentiment is already discounting a path to $30B of revenue and $45+ of EPS. We remain cautious on increased competition in the AI server market from traditional vendors and (original design manufacturers) as well as from SMCI concentration risk in AI shipments with ~5-7% of unit shipments accounting for ~60% of revenue,” Rakers added.
Wall Street analysts and SA Authors rate Super Micro (SMCI) stock Buy. Seeking Alpha’s Quant rating on the stock is Strong Buy.