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SMCI stock upgraded to Neutral at JPMorgan after ‘cycling past’ filing challenges

SMCI stock upgraded to Neutral at JPMorgan after ‘cycling past’ filing challenges

  • 21.03.2025 13:48
  • in.investing.com
  • Keywords: AI

JPMorgan upgraded Super Micro Computer (SMCI) stock to Neutral after the company overcame SEC filing challenges and benefits from AI server demand. The firm raised revenue forecasts but cautioned on margin pressures and risks like DOJ investigation.

SMCI NewsSMCIsentiment_satisfiedJPM/PJsentiment_satisfiedNVDAsentiment_satisfiedDELLsentiment_neutral

Estimated market influence

Super Micro Computer

Super Micro Computer

Positivesentiment_satisfied
Analyst rating: Neutral

Upgraded to Neutral at JPMorgan due to cycling past filing challenges and increased demand for AI servers.

JPMorgan

Positivesentiment_satisfied
Analyst rating: —

Upgraded SMCI stock to Neutral, citing positive developments like higher ASPs and supply improvements from Nvidia.

Nvidia

Nvidia

Positivesentiment_satisfied
Analyst rating: Strong buy

Improved supply ramp benefiting Super Micro's revenue growth.

Dell

Dell

Neutralsentiment_neutral
Analyst rating: Strong buy

Used as a peer company for comparison; trading at an 11x multiple compared to JPMorgan's 10x for SMCI due to historical issues.

Context

Analysis of SMCI Stock Upgrade by JPMorgan

Key Upgrades and Revisions

  • Stock Rating: Upgraded from Underweight to Neutral at JPMorgan
  • Price Target: Raised to $45 (from previous target), applying a 10x earnings multiple
  • Revenue Forecast FY26: Increased to $39 billion, up by 65% YoY (from $34 billion)
  • Gross Margin FY26: Slightly reduced to 11.1% (from 11.2% previously)
  • EPS Forecast FY26: Raised to $3.70 (from $3.25)

Positive Factors Driving the Upgrade

  • AI Server Demand: Anticipated benefits from increased demand for Blackwell-based server shipments
  • Higher ASPs: Contributing to revenue growth
  • Nvidia Supply Ramp: Improved supply chain dynamics

Risks and Concerns

  • Margin Pressures: Potential moderation in gross margins due to competitive landscape and elevated expenses
  • Working Capital Challenges: Expected starting Q4 2025 into FY26
  • Debt Raises: Anticipated need for additional debt beyond recent convertible note offering, increasing interest expenses

Valuation Considerations

  • Peer Comparison: Traded at a modest discount to Dell (11x multiple) due to historical audit challenges and ongoing issues (CFO change, DOJ investigation)

Long-Term Implications

  • Revenue Growth Potential: Strong growth trajectory with AI server demand
  • Margin Moderation: Likely to constrain operating margin expansion and EPS growth relative to revenue
  • Regulatory Risks: Ongoing Department of Justice investigation remains a concern

Strategic Considerations

  • Investment in Inventory: Heavy investment expected to support revenue growth
  • Operational Focus: Need for improved internal controls to mitigate margin pressures