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Super Micro Computer (NASDAQ:SMCI) stock fell about 3% on Monday after Susquehanna downgraded the shares to Negative from Neutral and reduced the price target to $160 from $240, noting that margin pressure is intensifying.
The analysts said that they were reducing EPS estimates to reflect increased gross margin pressure caused by increased competition and higher memory/storage cost.
In addition, there is increased diversification in server architecture including AI application, consequently requiring higher inventories due to a larger number of SKUs for each configuration. Updated estimates also reflect the 3% dilution from the Dec. 1 equity financing, the analysts added.
The analysts noted that their estimate change and downgrade is based on industry fundamentals. They acknowledge the SuperMicro’s strategy of enabling mass customization of next gen server architecture, including AI Servers.
However, the analysts noted that, consistent with their industry view and recent checks from across the supply chain, there are several factors that have led to estimate reduction.
Super Micro (SMCI) has a Strong Buy rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is Buy and so is the average Wall Street analysts’ rating.
