The Fourth Quarter Fiscal Year 2025 earnings report for Super Micro Computer (NASDAQ:SMCI) landed last week – with a resounding thud. Missing top- and bottom-line projections has a tendency to disappoint, as does offering guidance that falls short of expectations.
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And yet, that’s where we’re at – as net sales of $5.76 billion missed estimates by $156.37 million while an EPS GAAP of $0.31 fell short by $0.03. Meanwhile non-GAAP EPS guidance for the coming quarter of $0.40 to $0.52 was below analyst predictions of $0.59.
The market’s displeasure was tangible, with SMCI’s share price falling by over 20% during the past five days. One top investor known by the pseudonym KM Capital spots an opportunity to sail straight into the breach.
“SMCI remains massively undervalued, while its AI exposure is still rock-solid,” asserts the 5-star investor, who is among the top 2% of TipRanks’ stock pros.
KM notes that the earnings miss was “minor,” and is instead choosing to focus on forward revenues that are riding the massive AI wave. As evidence, KM cites the Q2 numbers from the three largest cloud players – Amazon, Microsoft, and Alphabet – all of whom enjoyed revenue growth north of 17%. This bodes well for continued investments in data centers, which stands to boost SMCI.
“AI demand remains powerful, supported by cloud giants’ growth and chip industry trends, positioning SMCI to benefit from ongoing sector momentum,” adds KM.
It certainly helps that SMCI’s innovations are consistently compatible with Nvidia’s systems, points out KM, who reminds investors it is always a good idea to safeguard a “strong technological bond” with the AI kingpin.
According to KM, the recent drop has pushed SMCI’s Forward Price-to-Earnings ratio to “extremely low” levels, as its multiple for 2028 is 12x. Moreover, its Price-to-Sales multiple of 0.85x is practically unheard of – and generally only applies to those firms that are either “drowning in debt” or operate in industries that are heading downhill.
Of the former, KM further details that SMCI has a healthy capital structure, with a market cap of close to $27 billion and debts just slightly over $5 billion. As for the industry trend, well that’s the big feather in SMCI’s cap.
“There are multiple indications that tailwinds for AI stocks are likely to remain strong for longer,” concludes KM Capital, who rates SMCI a Strong Buy. (To watch KM Capital’s track record, click here)
Wall Street feels positive about SMCI as well, though its exuberance is a bit tempered. With 6 Buys, 7 Holds, and 2 Sells, SMCI enjoys a Moderate Buy consensus rating. Still, its 12-month average price target of $47.92 implies only minimal movement in the year ahead. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.