Could Supermicro Computers (SMCI) Be this Decade’s Dell Computer?

Stock (Symbol)

Supermicro Computers (SMCI)

Stock Price


Data is as of
November 3, 2022
Expected to Report
January 30
Company Description
Super Micro Computer provides Silicon Valley-based accelerated compute platforms that are application-optimized server and storage systems for various markets, including enterprise data centers, cloud computing, artificial intelligence, fifth generation (5G) and edge computing.

The Company’s solutions include artificial intelligence (AI) and high-performance computing (HPC), enterprise applications and data analytics, data management, cloud and virtualization, 5G, edge computing and Internet of things (IoT), and hyperscale infrastructure.

The Company also provides global support and services to help customers install, upgrade, and maintain their computing infrastructure.

The Company offers an array of products which include servers and storage, building blocks, IoT and embedded, networking, and workstations and gaming products.

The Company operates in United States, Asia and Europe. Source: Refinitiv

Sharek’s Take
David SharekSupermicro (SMCI) is one of the hottest stocks in the stock market today, as profits are scorching hot. This company made $2.48 in profits in 2021, then more than doubled that to $5.65 last year. This year, SMCI could make $11 or more in profits. It’s so hard to tell what the real figure could be as the figures are soaring so fast. For instance, last qtr the company was expected to earn $1.58. Then that figure increased to $2.18. And in the end, SMCI made $3.42. So profits were double previous estimates. And when you compare that to last year’s $0.58 in profits, the company delivered 490% profit growth in the quarter.

Supermicro is a Silicon Valley based manufacturer of server and storage systems for enterprise data centers, cloud computing, artificial intelligence (AI), 5G and edge computing. In Fiscal 2021, the company had greater than 1000 customers in over 100 countries. The company is headquartered in Silicon Valley. Products are manufactured in plants in the Netherlands and Taiwan, then more than half the production is completed in San Jose, California. Here’s some facts about SMCI:

  • Supermicro has evolved from building motherboards to full systems that include software and system integration. Historically, data centers had been uniquely built for each project.
  • SMCI’s Plug N’ Play Rack Solutions allow the company to quickly “build” server and storage systems quickly using building blocks across its product lines. It mixes-and-matches GPUs and processors in the same metal box.
  • The company then designs the system, provides rack assembly, cabling, software and firmware configuration, software design and liquid cooling.
  • Supermicro’s systems use less power than its competitors, which saves the customer money and makes for a Greener environment.

Supermicro (SMCI) stock is red-hot right now, but this could still be the beginning of the move higher, as the stock has a P/E of just 9. A 20 P/E would cause the stock to more than double. In addition, annual profit estimates might still get increased. Analysts have the company making $8.58 this year, but the company just said it could make between $9.00 and $11.30 this year. Honestly, it could be more. This company is expanding so rapidly it reminds me of Dell Computer back in the 1990s. Dell was also a “simple” company in putting computers together, but the company’s profits soared during the decade due to its low prices. I will add SMCI to the Growth Portfolio and Aggressive Growth Portfolio today.

One Year Chart
This stock is one of the market’s hottest right now. And still, the valuation is quite low as the stock has a P/E of only 9.

Notice qtrly profit growth is not only in the triple-digits, but is also accelerating. This company is delivering phenomenal growth.

The Est. LTG of 10% is modest. I think this figure should be a lot higher.

Earnings Table
Last qtr, Supermicro delivered 490% profit growth and exceeded estimates of 276% growth. Revenue climbed 79%, which was accelerating growth from 53% posted 2QtrsAgo. During the past four qtr, profits (EPS) have jumped from $0.88 to $1.55, $2.62, and $3.42. Profits are on another level now!

Annual Profit Estimates are soaring. After the earnings call, management upped 2023 profit estimates to between $9 and $11.30. Still, I used Refinitiv’s $8.58 estimate. I imagine Refinitiv will up its figure next week, and perhaps that will attract some investors.

Qtrly Profit Estimates are for 197%, -3%, -38%, and -35% growth the next four qtrs. Management upped net qtr’s revenue and profit estimate.

Fair Value
This stock has historically had a low P/E as its been in a low-margin business. So I’m giving it a low P/E now, but investors could come to the realization that SMCI has evolved into a more valuable company.

My Fair Value is a P/E of 20. Note the stock has consistently had a low P/E. During good times, the P/E got into the lower 20s.

Still, if this stock gets just a 20 P/E, it could double.

Note, SMCI has a June 30th Fiscal year end. So we are in 2023 now. And this 2023 price target of $172 is between now and June.

Bottom Line
Supermicro Computers (SMCI) has had a rocky history in its ten-year chart. But 2022 marked a new era of profitability, and the stock responded positively.

Now the stock is a little extended in the yen-year view. But with profits growing rapidly and estimates soaring, the stock still sells for less than 10x earnings. I think SMCI could double quickly, and this isn’t me hyping the stock. It’s just that cheap.

SMCI will start at #1 in the Growth Stock Portfolio and Aggressive Growth Portfolio Power Rankings. I’ll take a big position in the stock as I feel this is a true market leader. This could be something big.

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