Super Micro Computer (SMCI 35.94%) stock is rocketing higher Friday. The server-and-storage company’s share price was up 32.6% as of 1 p.m. ET, according to data from S&P Global Market Intelligence.
After the market closed yesterday, Super Micro Computer published updated guidance for the second quarter of its 2024 fiscal year, which closed Dec. 31. The guidance updates indicate that the business is seeing huge demand driven by the rise of artificial intelligence.
Take a look at the guidance comparison for the company’s fiscal Q2 sales, earnings, and non-GAAP (generally accepted accounting principles) adjusted earnings in the chart.
| Metric | Previous Guidance | Updated Guidance | Midpoint Guidance Improvement |
|---|---|---|---|
| Revenue | Between $2.7 billion and $2.9 billion | Between $3.6 billion and $3.65 billion | 29.5% |
| Earnings per share | Between $3.75 and $4.24 | Between $4.90 and $5.05 | 24.5% |
| Adjusted earnings per share | Between $4.40 and $4.88 | Between $5.40 and $5.55 | 18% |
Data source: Super Micro Computer. Table by author.
For comparison, the company posted revenue of roughly $1.8 billion in last year’s second quarter. Earnings per share came in at $3.14, and adjusted earnings per share came in at $3.26. The company’s updated guidance suggests it delivered massive growth along key lines in its last completed quarter.
Is Super Micro Stock still a smart buy for 2024?
Given the explosive nature of Super Micro Computer’s upward guidance revisions, the recent gains for the stock do not appear to be unwarranted. The company is seeing demand for its technologies skyrocket, and there’s a good chance that this trend will continue in the near future.
Even with the huge gains for the company’s share price today, Super Micro Computer is still valued at roughly 2 times expected forward sales and 24 times expected forward earnings. Given recent growth and indications of surging momentum, these metrics suggest that the stock could still have considerable upside potential.
Investors should understand that the company’s performance could be impacted by cyclical trends before going all in on the stock. But for now, the company appears to be benefiting from powerful new demand catalysts. It’s possible that these new tailwinds will continue for quite some time.
Buying into a stock on the heels of explosive gains can be risky, but Super Micro is delivering performance that backs up the impressive valuation momentum. For risk-tolerant investors, building a position in the stock could still have long-term payoffs.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Super Micro Computer. The Motley Fool has a disclosure policy.
