Shares of Super Micro Computer (NASDAQ: SMCI) have been on a red-hot streak, with gains of 795% in the past year. Analysts are bullish on the stock, with Loop Capital analyst Ananda Baruah upgrading his price target to $1,500, a 54% increase from the current trading price.
The reason behind the analyst’s optimism is Supermicro’s booming business in the artificial intelligence (AI) server solutions market. The company’s fiscal 2024 revenue is expected to double from the previous year, reaching $14.5 billion, with earnings per share nearly doubling as well.
Baruah believes that Supermicro could generate between $30 billion and $40 billion in revenue by 2026, with earnings per share jumping to $50 to $60. This is significantly higher than consensus estimates, but the analyst points to the company’s strong position in the AI server market and its plans for expansion as reasons for the bullish outlook.
Investors can expect significant upside potential, with Supermicro’s price target based on a forward earnings multiple of 30. However, given the premium valuation that AI stocks tend to command, there is a chance for even stronger returns.
While Super Micro Computer may not be on the Motley Fool Stock Advisor’s list of top stocks, the potential for growth in the AI server market makes it an intriguing investment opportunity. With the company’s focus on expanding its manufacturing capacity and strong growth projections, Supermicro could be a stock to watch in the coming years.
