Recently, Super Micro Computer (NASDAQ: SMCI) has been the object of investor adoration. The stock price of the company that makes AI servers and computer systems has increased by almost 293% in the year 2024 alone.
However, Argus, an investment research organization, believes that Supermicro stock still has time for investors to earn a profit. Jim Kelleher, director of research at Argus
and his colleagues began covering Supermicro, as it is more popularly known, with a buy recommendation and a $1,350 stock price objective. That would be a 21% increase in value over the following twelve months, given the current share price of roughly $1,118.
As reasons to maintain buying Supermicro shares, Kelleher and colleagues cited the company's rapidly increasing sales and profits. The increased processing power required for AI applications is driving this expansion, and there has been an explosion in demand for server and computer solutions across a wide range of industries.
In instance, Supermicro's GPU (graphics processing unit)-based computers are essential for generative AI.
One analyst's note to clients read, "Super Micro has been growing earnings at an average annual rate of 53% in recent years, while the Tech industry earnings are growing at low double-digit percentages."
To capitalize on its growing market share, Supermicro has lately made several moves. It has just obtained nearly $1.7 billion in new funding through the issuance of zero-interest convertible notes. But if those bonds are eventually turned into ordinary stock, shareholders will see their holdings reduced.
The already-experienced surge in value of Supermicro shares is another concern for investors. This was also something that Kelleher touched on when he wrote, "Although the SMCI shares are not inexpensive, we believe prospects for near-term and long-term growth justify investment in the shares at current levels."
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