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Super Micro Computer (SMCI) shares are ripping higher on July 22 after the artificial intelligence (AI) server specialist posted a bullish Q4 earnings preview.
In its press release, the firm said it received new orders worth over $60 billion during the quarter, adding that gross margin is now expected to come in at 16% — nearly double the 8.3% it had guided for earlier.
Despite today’s surge, however, SMCI stock remains down about 35% versus its June high.
Gross Margin Acceleration Drives SMCI Stock Higher
Super Micro expects a major boost to its margins in Q4 even though it expects its revenue to print near the lower end of its previously guided range ($11 billion to $12.5 billion).
According to Goldman Sachs analysts, the expected pressure on the top line is likely due to a delay in a lower-margin deal, which organically lifted gross profitability in the fourth quarter.
That said, locking in more than $60 billion in new artificial intelligence server orders demonstrates booming enterprise demand for liquid-cooled clusters and artificial intelligence hardware.
SMCI’s massive backlog significantly improves forward earnings visibility and reinforces its core growth trajectory.
Should You Load Up on SMCI Shares Today?
Following the preliminary Q4 earnings, Needham analysts led by Quinn Bolton doubled down on their bullish view on Super Micro Computer.
Bolton maintained a “Buy” rating on SMCI shares today and raised the price target to $46, signaling potential for a more than 45% rally from current levels.
He pointed to the firm’s improving profitability and record-setting order intake as evidence that it continues to gain ground in high-density rack-scale solutions.
Note that Super Micro soared past its 20-day moving average (MA) this morning and is challenging its 50-day MA at writing, indicating bulls are beginning to take back control across multiple time-frames.
What’s the Consensus Rating on Super Micro?
Investors should also note that other Wall Street analysts also forecast significant upside in Super Micro stock from current levels.
According to Barchart, while the consensus rating on the AI server giant remains at “Hold,” the mean price target of nearly $36 continues to suggest potential upside of about 13% from here.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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