Supermicro, SuperNVIDIA?

Current action is most likely a short squeeze, something that rarely leads to sustainable price performance. Once this push is over, fundamental price discovery will likely move this much lower.

Disclaimer: The information contained in this article is not and should not be construed as investment advice. This is my investing journey and I simply share what I do and why I do that for educational and entertainment purposes.

(SMCI’s financial year ends in June. They have recently reported the second fiscal quarter of their 2024 fiscal year. I am going to refer to their calendar quarters below because that reduces confusion in my experience.)

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A new AI star is born it seems. Supermicro, ticker SMCI 0.00%↑ , preannounced their CY4Q23 earnings on January 18, 2024, 11 days before their scheduled earnings release.

In light “strong market and end customer demand for [their] rack-scale, AI and Total IT Solutions”, they raised their quarterly revenue guidance from $2.8bn to $3.6bn and their EPS guidance from $4.64 to $5.48 (all figures taken as the midpoint of their range for simplification purposes). Investors were ecstatic. The stock finished January 19, 2024 up 36% to $423. A massive move, but in light of the raise of the guidance, it could actually be called justified.

But then the stock kept pumping on essentially no further news. On January 29, 2024, they released their full earnings, which unsurprisingly came in at the midpoint of their updated guidance. There was very little new information in that release. Sure, they raised their full year revenue guidance from $10.5bn to $14.5bn (+38%) at the midpoint, but that should not come as a surprise given the step change in their business model that had already happened.

The stock has continued pumping since then. As of today’s close, of $663, it’s up 60% since the close of the day after the preannouncement. After hours, it’s even chilling above $680!

60% in three weeks on essentially zero news. The company is now worth $36bn, up 700% over the past year.

In spite of this galactical run, its valuation metrics don’t appear crazy. They are trading at ‘just’ 30x their annualized C4Q23 EPS. And their EV/C4Q23 annualized revenue is just shy of 2.5x. These are rookie numbers compared to what tech investors are familiar with in other technology players.

This has triggered some valuation-driven bullish comments on social media recently, for example here. In this article, I am taking a closer look at this company. Is it a bubble or not?

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TLDR Summary