Super Micro Computer (SMCI) shares have experienced a significant drop from their 2024 high. However, analysts at Needham are optimistic about the server maker’s future and have initiated coverage with a “buy” rating and a price target of $600, representing a premium of over 36% to Tuesday’s closing price. Needham referred to Super Micro as “the coolest kid in AI town” and highlighted its involvement in deploying some of the world’s largest AI clusters. Additionally, the company entered fiscal 2025 with a record order backlog.
One of the key factors driving Needham’s bullish outlook is Super Micro’s position as a first mover in rack-level liquid cooling systems. These systems play a crucial role in reducing the electricity cost of data centers. Super Micro has expanded its liquid cooling rack manufacturing capacity in Silicon Valley and Taiwan and is set to launch production in Malaysia in November. This expansion is expected to significantly increase the company’s manufacturing capacity of liquid cooling rack systems in the long term.
Despite Needham’s positive outlook, Super Micro’s stock has faced skepticism from other analysts, including those at JP Morgan. Earlier this month, JP Morgan downgraded Super Micro to “neutral” from “overweight” and reduced its price target to $500 per share from $950. JP Morgan cited Super Micro’s delayed annual report as a potential overhang and recommended that new investors remain on the sidelines until the uncertainty is resolved.
While Super Micro’s stock has gained over 50% this year, it has also lost about half of its value over the past three months, partly due to disappointing fiscal fourth-quarter earnings. The drop in stock price presents an opportunity for investors who believe in the long-term potential of Super Micro and its involvement in the AI industry.
In conclusion, Super Micro Computer’s stock has experienced a significant drop from its 2024 high, but analysts at Needham are optimistic about its future. Needham initiated coverage with a “buy” rating and a price target of $600, citing the company’s position as a first mover in rack-level liquid cooling systems and its involvement in deploying large AI clusters. However, other analysts, such as those at JP Morgan, have expressed skepticism and downgraded Super Micro’s stock. Despite the differing opinions, Super Micro’s stock presents an opportunity for investors who believe in its long-term potential in the AI industry.
