Key Takeaways:
- The 2-Minute Valuation Model values Super Micro Computer stock at $56 per share in 1 year.
- That’s a potential 40% upside from today’s price of $40 per share, which would signify an impressive 40% annual return.
- Super Micro is projected to grow EPS by 83% over the next 2 years as AI server demand accelerates.
- Despite recent volatility and accounting concerns, SMCI stock is trading at historically reasonable multiples.
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Super Micro Computer (SMCI) is a leading provider of high-performance server and storage solutions, specializing in AI-optimized hardware that powers data centers worldwide.
Despite facing significant headwinds from accounting concerns and short-seller attacks that have driven the stock down by over 60% from its peak, SMCI remains well-positioned to benefit from the massive AI infrastructure buildout.
With SMCI stock now trading at $40.09 per share, Super Micro Computer presents a compelling turnaround opportunity for investors seeking exposure to the AI server boom at a deeply discounted valuation.
Let’s examine why this AI infrastructure play could deliver substantial returns as the company addresses its challenges.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings-per-share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why SMCI Stock Looks Undervalued
Forecast
Based on analyst estimates shown in the chart below, Super Micro is expected to achieve solid earnings growth over the next two years, despite near-term challenges.
EPS is projected to surge from $2.21 in fiscal 2024 (ended in June) to $4.05 by 2027, representing an 83% total increase.
EPS is projected to decline modestly from $2.21 in 2024 to $2.08 in 2025 (-6% decline), reflecting the impact of accounting issues and business disruption.
However, Super Micro is expected to recover strongly, with EPS growing to $2.90 in 2026 (39% growth) and $4.05 in 2027 (39% growth)
This earnings growth for SMCI stock is likely to be driven by:
- AI server demand explosion: Data centers require specialized high-performance servers for AI workloads, SMCI’s core strength.
- Resolution of accounting issues: Management addressing compliance concerns should restore investor confidence.
- Market share expansion: SMCI’s technical leadership in liquid cooling and AI-optimized designs positions it for growth.
- Margin recovery: Operational improvements and scale benefits should boost profitability as volumes recover.
For our valuation, we’ll estimate that SMCI stock will reach $4 in EPS in 2027.
See Super Micro’s full analyst estimates (It’s free) >>>
Valuation Multiple
Today, SMCI stock trades at around 16x forward earnings, below its 12-month historical average P/E of 13x, as shown in the valuation chart.
For our valuation, we’ll use a conservative forward P/E multiple of 14x. This is above the company’s historical average but below its current multiple.
Fair Value of Super Micro Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $4
- Conservative forward P/E multiple: 14x
Expected Normalized EPS ($4) * Forward P/E ratio (14x) = Expected Share Price ($56)
The 1-year expected SMCI stock price we would get from this valuation is $56 per share.
With Super Micro stock currently trading at around $40 per share, this implies a potential upside of 40% over the next year:
A 40% annual return would be pretty staggering, considering the S&P 500 has averaged about 10% per year over the past 60 years.
Remember, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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What is the Average Analyst Price Target for SMCI Stock?
Wall Street analysts believe Super Micro stock is undervalued at today’s price.
The average price target for SMCI stock is around $43 per share, suggesting about 7% upside from the stock’s current share price. However, analysts have price targets as high as $93/share for SMCI stock, which suggests the stock could be highly undervalued today.
Risks to Consider
Despite the bullish outlook, investors should be aware of several risks that could impact the server maker’s growth trajectory:
- Accounting and compliance issues: Ongoing SEC investigations and auditing challenges could lead to further business disruption.
- Execution risk: Management must successfully resolve operational issues while maintaining a competitive position
- Competition intensity: Dell, HPE, and other server vendors are aggressively pursuing the AI server market share.
- Customer concentration: Heavy reliance on major cloud providers creates vulnerability to customer shifts.
TIKR Takeaway
At current levels, Super Micro Computer presents a high-risk, high-reward opportunity.
The tech stock’s upside potential is driven by its leadership position in AI-optimized server solutions and the massive infrastructure investment cycle underway, offset by substantial execution and regulatory risks.
While SMCI stock faces near-term challenges that have created deep value, its technical expertise in liquid cooling, high-density server designs, and AI workload optimization positions it uniquely for the next phase of data center evolution.
SMCI’s compelling valuation and AI market exposure make it attractive for risk-tolerant investors, but only if they pay close attention to execution milestones.
Is SMCI stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if it is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
