Super Micro Remains A 'Show-Me Story' As Analysts Weigh AI Growth Against Execution Risks

Zinger Key PointsBofA’s Ruplu Bhattacharya gives Super Micro with an Underperform rating and $35 target, citing margin pressure and rising competition.He flags risks like AI spending slowdown, supply constraints and volatility, projecting Q4 revenue of $5.94B and EPS of 73 cents.From tariffs to inflation, macro risks are rising—Matt Maley reveals how he’s trading it all, live this Wednesday July 9 at 6 PM ET.BofA Securities analystRuplu Bhattacharyainitiated coverage onSuper Micro ComputerSMCIwith an Underperform rating and a price target of $35 on Wednesday.Bhattacharya resumed coverage of Super Micro with an Underperform rating and a price objective of $35 (~29% potential downside). The analyst cited rising competition in the AI server and rack market as a reason for margins staying under pressure.Also Read:Super Micro Accelerates European Footprint To Meet Exploding AI NeedsHe also noted that limited access to key components like GPUs and liquid cooling systems could restrict revenue growth.Bhattacharya pointed out that rivalsDell TechnologiesandHewlett-Packard Enterprisehold an edge with enterprise clients. He added that over time, liquid cooling could become commoditized, narrowing Super Micro’s current manufacturing advantage. As per the analyst, a slowdown in AI spending may also weigh on revenue.Bhattacharya flagged risks tied to the stock’s volatility, headline sensitivity, customer concentration in accounts receivable, ongoing litigation and investigations, and the potential need for new capital that could dilute shareholders. He also emphasized the importance of management addressing material weaknesses in financial reporting controls.Bhattacharya’s $35 price target for Super Micro was based on 13x his estimated 2026 EPS of $2.67. Given his projection of 13% compound annual net income growth from fiscal 2024 to 2027, he considered this multiple reasonable. While the 13x multiple exceeded Super Micro’s long-term median of 10x, the analyst justified the premium due to the company’s AI-driven growth.Despite recognizing Super Micro’s strong AI server revenue growth — comparable to Dell and Hewlett Packard — Bhattacharya sees the company as a “show-me” story, pointing to past volatility and execution risks. He applies a 13x multiple, higher than the 9x median for OEM peers.Super Micro is growing faster and doesn’t operate lower-margin segments like PCs, which weigh on companies like Dell and Lenovo, Bhattacharya noted. However, the analyst views the current trading premium as excessive and adjusts his multiple closer to peer levels.Bhattacharya modeled Super Micro’s operating margins slightly below those of North American EMS and Asian ODM peers but expects this gap to widen as AI server competition intensifies. He views EMS firms as more defensive during downturns due to their diversified exposure to stable, high-margin sectors such as healthcare, industrials, and automotive. The analyst noted that EMS companies generally trade at a median 18x multiple, while ODMs trade around 12x. His 13x estimate places Super Micro above ODMs but below EMS peers.For the upcoming fourth quarter, Bhattacharya forecasted revenue of $5.94 billion and adjusted EPS of 73 cents.Price Action:SMCI shares were trading lower by 0.31% to $48.96 at last check on Wednesday.Loading...Loading...Read Next:Snowflake Stock Jumps 45% In 2025 As AI Data Cloud Drives Record RevenuePhoto: CryptoFX / ShutterstockSMCISuper Micro Computer Inc$49.260.31%Stock Score Locked: Want to See it?Benzinga Rankings give you vital metrics on any stock – anytime.Reveal Full ScoreEdge RankingsMomentum37.80Growth86.56Quality94.79Value62.44Price TrendShortMediumLongOverviewThis content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.Market News and Data brought to you by Benzinga APIs© 2025 Benzinga.com. . .EarningsAnalyst RatingsOptionsDividendsIPOsdate▲▼ticker▲▼name▲▼Price Target▲▼Upside/Downside▲▼Recommendation▲▼Firm▲▼Click to see moreAnalyst RatingsupdatesAnalyst CalendarJoin Benzinga Edge and unlock all the major upgrades, downgrades, and changes to the market's most accurate analysts.Click to JoinPosted In:NewsPrice TargetInitiationTop StoriesAnalyst RatingsTechTrading IdeasAIAI Generatedartificial intelligenceBriefsDELLDell TechnologiesExpert Ideashewlett-packardHewlett-Packard Enterprises