Super Micro Computer, the Technology sector company, was revisited by a Wall Street analyst yesterday. Analyst Ruplu Bhattacharya from Bank of America Securities maintained a Sell rating on the stock and has a $34.00 price target.
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Ruplu Bhattacharya has given his Sell rating due to a combination of factors impacting Super Micro Computer. Despite strong demand for servers and racks, the company’s margins are under pressure. The competitive AI server market and the strategic design win that involves higher costs and lower margins are contributing to this pressure. Additionally, Super Micro is making significant investments with new customers, which includes AI engineering support and services, further impacting margins.
Management is focused on balancing market share growth with margin improvement, but challenges such as logistics and customer readiness can affect inventory and margins. While the company is expanding its manufacturing capacity and investing in go-to-market and support services, the scale of projects often results in lower margins. The company’s efforts to address internal control weaknesses and manage operating expenses are ongoing, but these factors contribute to the cautious outlook reflected in the Sell rating.
Based on the recent corporate insider activity of 74 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SMCI in relation to earlier this year.