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Super Micro Computer, Inc. (SMCI) Message Board

  • hicksak hicksak Oct 25, 2013 2:42 PM Flag

    Sandy Bridge launch is underappreciated

    Sandy Bridge servers were just launched in September. SMCI only had 3 weeks in Q3 to sell its Sandy Bridge servers. So its topline is growing nicely; the issue here are margins. HDD margins have brought the corporate average down to 15% from 18% due to mgmt's panic buying after the Thai floods. Now they are holding almost 6 months worth of higher priced HDD so that is hitting margins. Also, SMCI has a production facility in Taiwan that is running about 60% capacity due to Asia demand weakness. That is also hitting margins.

    Here's the deal: these things are easily correctable over the next 3-6 months. Top line growth is so rare these days because it is so difficult to achieve. SMCI has it. You can't beat that profile (sorta like you can't coach speed, but you can coach fundamentals). Just look at Amazon - topline growth is very desirable these days, regardless of profit.

    The stock market is supposed to look 6-12 months out, unless a particular stock has had a history of misses like SMCI has. So, this company has one more quarter until investors/analysts realize it is on the up in terms of margins (higher priced HDD will burn off and Taiwan facility can be cost-aligned within a quarter or the expected tech pickup in Asia in Q1 occurs).

    By January, this stock will be at $18. Sandy Bridge processors/servers are will create a big replacement cycle over the next year, and SMCI will be a big beneficiary.

    Sentiment: Strong Buy

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