Can Super Micro’s Stock (NASDAQ: SMCI) Continue to Outperform Market?

Super Micro Computer's stock (NASDAQ: SMCI) has been one of the better performers on the Nasdaq this year, with gains of 22.80% YTD only telling a fraction of the story. After a truly terrible last 10 months of 2024, SMCI began this year with a strong rally, doubling up from January through to mid Feb, and breaching $60. Since then however, the market, aswell as Super Micro have taken a turn, with the pullback in the stock now close to 40% from those YTD highs.

Those considering buying the dip may do well, but some consideration also needs to made for the bear case. The stock is not long from 52 week lows of $17.25, with barely three months passed. The company's recent history has also been marked by a series of controversies, strategic shifts, and market responses that have contributed to its current valuation.

Super Micro Computer gained recognition as a leader in data center startups at the start of 2024. However, this momentum was disrupted due to controversies regarding its financial reporting, which led to the resignation of its auditor. The situation resulted in delays in filing important market reports, causing uncertainty among investors. In February 2025, Super Micro Computer filed its pending 10-Q and 10-K reports, which improved its standing in the market.

Despite this rebound, the stock has recently seen significant pullback driven in part by a more risk off trading environment, broader economic concerns, and a stock market that has moved negative on the year. The whole AI trade has taken a turn, and the Nasdaq Composite has itself dropped 9.40% this year, and more than 12% in the past few weeks.

Strategically, Super Micro Computer has taken steps to address past operational challenges and future growth opportunities. The company replaced its accountant with BDO, undertook executive restructuring, and took financial actions to bolster its position. This includes raising $700 million through senior notes aimed at expanding AI capabilities and maintaining an ambitious revenue target of $40 billion by FY2026. The company's latest financial results show promising growth, with a 54.9% rise in revenue year-over-year in its Q2 FY2025 to $5.7 billion, even with a revision in revenue guidance.

Concerns about AI growth have particularly unsettled investors following industry's broader challenges, such as contract cancellations by major players like Microsoft. However, it's important to note that SMCI still trades at relatively low levels compared to other companies in the AI sector, with a PE ratio of 16, which could indicate potential value.

Analysts hold a consensus price target on the stock of $52.34, which reflects considerable perceived upside from the current price action ~$36. Also in recent days, Rosenblatt resumed coverage of the firm, re-initiated SMCI with a price target of $60, alongside a ‘Buy' rating. The analysts indicated Super Micro's nearly 70% share of revenue coming from AI accelerating being a positive.

Northland towards the end of last week also posted a revised target on SMCI, pushing up their previous Overweight rating of $57 to a new mark of $70.

Although Super Micro Computer faces uncertainties and market challenges, it remains a company that has backing from the street to turn things around. Further outperformance on the market may indeed be possible, but a look back at recent times also makes it's own case for the flip side being a possibility. Any path forward is unlikely to be smooth, but looking back over the past 3 years on the chart, when has it ever?