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 09:07
  • investing.com
  • Keywords: AI

JPMorgan upgraded SMCI stock to Neutral, citing progress past SEC filing challenges and strong demand for AI servers. While revenue growth is expected, concerns remain about margin pressures and ongoing risks like DOJ investigations.

SMCI NewsSMCIsentiment_satisfiedJPM/PJsentiment_satisfiedNVDAsentiment_satisfiedDELLsentiment_neutral
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Estimated market influence

Super Micro Computer

Super Micro Computer

Positivesentiment_satisfied
Analyst rating: Buy

Upgraded stock rating from Underweight to Neutral due to cycling past filing challenges and increased demand for AI servers.

JPMorgan

Positivesentiment_satisfied
Analyst rating: —

Upgraded SMCI stock to Neutral, citing higher ASPs and positive developments like Nvidia's supply ramp.

Nvidia

Nvidia

Positivesentiment_satisfied
Analyst rating: Strong buy

Improved supply ramp contributing to revenue growth for Super Micro Computer.

Dell

Dell

Neutralsentiment_neutral
Analyst rating: Strong buy

Used as a peer company for comparison, with a higher earnings multiple due to fewer historical issues.

Context

Analysis of SMCI Stock Upgrade by JPMorgan

Key Upgrades and Revisions

  • Stock Rating: Upgraded to Neutral from Underweight
  • Price Target: Raised to $45 (from previous target)
  • Earnings Multiple: Increased to 10x (previously 9x), still below peer Dell's 11x

Revenue and Margin Projections

  • FY26 Revenue Forecast: $39 billion (up from $34 billion, +65% YoY growth)
  • Gross Margin: Slightly reduced to 11.1% (from 11.2%)
  • EPS Forecast: Raised to $3.70 (from $3.25)

Drivers of Growth

  • AI Server Demand: Stronger-than-expected demand for Blackwell-based servers
  • Nvidia Supply Ramp: Improved supply chain dynamics
  • Higher ASPs: Contributing to revenue growth

Risks and Challenges

  • Margin Pressures: Competitive landscape and elevated expenses for internal controls
  • Working Capital Issues: Anticipated challenges in Q4 2025 and FY26
  • Debt Concerns: Heavy inventory investment may lead to additional debt raises, increasing interest expenses

Strategic Considerations

  • Valuation Discount: SMCI still trades at a discount due to historical audit issues and ongoing challenges (CFO change, DOJ investigation)
  • Long-Term Implications: Potential moderation in gross margins and EPS growth relative to revenue

Market Impact

  • The upgrade reflects JPMorgan's confidence in SMCI's ability to navigate past filing challenges and capitalize on AI server demand. However, risks related to margin compression and debt levels may limit stock upside.