Research analysts at Nomura lowered their rating for Super Micro Computer (NASDAQ:) stock to Neutral from Buy due to “limited share price upside.”
“After Supermicro’s strong guidance for CY4Q23-CY1Q24, we believe Supermico’s performance potential changed from “easy to beat low market expectations” in CY4Q23 to “less room to beat already-high market expectations”,” analysts said in a Wednesday note.
SMCI shares fell more than 2% in premarket trading.
Nomura’s view is due to uncertainties related to the gradual easing of CoWoS-S supply in the calendar year 2024 and the potential transition period between Hopper and Blackwell GPUs in the second half of the year.
The firm’s analysts acknowledge that Supermicro’s advanced liquid cooling solutions give it a competitive edge, which should support its gross profit margins. However, they caution that limited order visibility due to the aforementioned uncertainties could make it challenging for Supermicro to exceed sales expectations “and thus this could be a mixed bag, in our view,” they noted.
Nomura expects SMCI’s June quarterly sales to be largely in line with its guidance of $5.1-$5.5 billion. It notes that some liquid cooling projects have been pushed to later quarters, which reduces the likelihood of exceeding the guidance.
“However, as liquid cooling projects likely carry high GPM and there were still some shipment deliveries, given Supermicro’s dominant position in the market with better bargaining power, we think it maintained its GPM in the quarter, while its main competitor seems less aggressive in pricing due to low profitability,” analysts added.
Analysts believe Supermicro’s near- to mid-term outlook is unclear due to potential AI server order uncertainties. These stem from new procurement decisions by leading customers and the transition between Nvidia’s Hopper and Blackwell GPUs, which may influence SMCI as customers lean towards adopting Blackwell GPU solutions.
