Loop Capital cuts Super Micro Computer, Inc. (SMCI.US) target price, but remains optimistic about its AI prospects.

Loop Capital has released a research report, lowering the target price of Super Micro Computer, Inc. (SMCI.US) from $1500 to $1000, a decrease of almost 33.33%, but still maintaining a "buy" rating. Analyst Ananda Baruah pointed out that they lowered the target price because the company is striving to restore the gross margin/operating profit margin to 14%/10%, and is dealing with the situation regarding the delayed submission of the 10-K report. Baruah said, "In other words, we believe that the assumption that Super Micro Computer, Inc. is about to go bankrupt has been exaggerated, and its importance in generating artificial intelligence servers has been underestimated." The analyst pointed out that the normalized revenue of Super Micro Computer, Inc. is expected to exceed $40 billion, and conversations with clients indicate that with NVIDIA Corporation's new GPU Blackwell, the gross margin and operating profit margin of Super Micro Computer, Inc. are expected to recover to over 14% and 10%, respectively. The analyst believes that a normalized earnings per share of $50 is meaningful. Loop also believes that with such revenue growth and profit margins, Super Micro Computer, Inc. will once again achieve at least a PE ratio of 20 times. Last month, Super Micro Computer, Inc. stated that it was unable to submit its annual 10-K report on time. This sparked strong reactions from investors and analysts. Baruah acknowledged that Super Micro Computer, Inc. might need to submit the 10-K before investors can start building new core positions on a large scale, but Loop presented several "assumption" scenarios, including: What if Super Micro Computer, Inc.'s revenue does not reach $30 billion in the fiscal year 2025? (This implies there are ample upside opportunities). The analyst also added, what if the gross margin rises above 14% in the next four quarters and the operating profit margin exceeds 10%? Baruah stated that their collaboration with clients indicates that throughout the Blackwell cycle (Loop notes, now extending through most of the 2026 calendar year), Super Micro Computer, Inc. remains the preferred primary supplier for original equipment manufacturers (OEM). This also suggests that while there are now more providers of generative artificial intelligence servers, including original design manufacturers (ODM) involved, they do not offer the same high-profit services as Super Micro Computer, Inc. (such as rack integration and debugging), and the ODM's ability in this area does not meet the requirements of third parties. Furthermore, Baruah pointed out that this indicates that customers currently see the possibility of paying an additional gross profit margin of 200 to 300 basis points to Super Micro Computer, Inc. as a possible outcome of Blackwell, which would bring the gross margin back to above 14%. In other "assumptions," the analyst stated that if the pricing of similar generative artificial intelligence servers themselves is not more aggressive, does this mean that if Super Micro Computer, Inc.'s products shipped in June use air cooling instead of liquid cooling, the company's gross margin in the June quarter will be at a more typical level?