Goldman Sachs Starts Coverage on Super Micro (SMCI) With Sell, $26 Target

Super Micro Computer, Inc. (NASDAQ:SMCI) is one of the Trending AI Stocks on Wall Street. On January 13, Goldman Sachs analyst Katherine Murphy initiated coverage on the stock with a “Sell” rating with a $26 price target, down from $34. Firm analysts cited ongoing margin pressure and limited visibility on profitability despite SMCI’s AI server leadership in Tier 2 cloud markets.

“We assume coverage of Super Micro Computer Inc (SMCI) with a Sell rating (unchanged) and a 12-month target price of $26 reflecting 9X NTM+1Y EPS (vs. $34 reflecting 11X prior).”

Even though analyst Katherine Murphy believes that SMCI will remain a leader in the AI server market in the medium term, particularly demonstrating strength in the tier 2 cloud/ neocloud markets, she sees limited visibility into profitability levels.

This AI stock may fail to notch up major gains this year owing to large margin dilutive deals, increasing competition from OEMs and ODMs, and investments in scaling its enterprise opportunity.

The company’s margin-dilutive deals have already “halved its margin in the last three years to 9.5%,” with Murphy anticipating that to remain the case, at least for the short term.

“These concerns around profitability have weighed on consensus estimates, but we think there could still be further downside to margins, ultimately limiting visibility into SMCI's forward earnings.”

Super Micro Computer, Inc. (NASDAQ:SMCI) designs and manufactures high-performance server and storage solutions for data centers, cloud computing, AI, and edge computing worldwide.

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