Super Micro Computer Is Surprisingly Affordable

Max Molter
762 Followers
(6min)

Summary

  • Super Micro Computer offers exceptional revenue growth and is trading at reasonable valuations compared to AI peers, making it an attractive AI stock opportunity.
  • Profitability remains a weakness, with low gross and EBITDA margins, but future margin expansion to 30% is possible as the company matures.
  • A new partnership with Ericsson could accelerate Edge AI deployment, expand SMCI's addressable market, and potentially boost growth and margins.
  • Technical indicators show a recovery play with strong upside potential, supporting my buy rating despite current margin concerns.

AI - chatbot. Artificial Intelligence concept

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Introduction

Super Micro Computer (SMCI) is one of the big AI stocks investors are talking about. Despite this popularity, the company is currently trading at very reasonable multiples given its strong growth.

Fundamentals

As mentioned earlier, SMCI has achieved significant

This article was written by

762 Followers
My main area of interest is algorithmic trading and trading strategies. However, I am also very interested in macroeconomic topics, especially since I lived and studied in Shanghai for half a year. That is why I plan to write about those topics with a focus on China. I am one semester away from finishing my bachelor's degree in Economics and Finance and plan to pursue a master's degree in quantitative finance afterward. I have also visited finance-related events such as the Abu Dhabi Finance Week and hold a CISI level 3 certificate in Wealth and Investment Management. During the past 2 years, when I managed money via the copy trading system of Etoro, I realized that I would get far better clarity concerning my investment ideas when discussing them with other investors, hence my motivation to write on Seeking Alpha. My track record has so far been a rather conservative one. During the end of 2020, when I first started trading, my portfolio yielded 17.5 percent. Shortly before the crash in 2022, I went market neutral and managed to be almost flat on the year, only losing 0.16 percent. What followed was my worst year, only gaining 0.8 percent while the market was soaring. This made me realize that I needed a system for when to exit and enter the market and start my journey as a quantitative trader. Since then, my portfolio yielded 12.84 last year at a beta of less than 0.6. This year, I have finally increased my risk to enable a higher yield on my investment.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in SMCI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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