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Super Micro Computer Pops 13% After-Hours On Stellar Earnings Beat

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support@smarteranalyst.com (Ben Mahaney)
·3 min read
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Shares in Super Micro Computer (SMCI) rocketed 12.6% high in Tuesday’s after-market trading after the IT company reported stellar earning results for the fiscal first quarter.

Specifically, Q1 EPS of $0.59 easily beat the consensus of $0.16, while revenue of $762.25M fell 4.7% year-over-year, but was notably higher than the $748M consensus.

Gross margin came in at 17% vs 13.8% in the fourth quarter of fiscal year 2020 and 16.4% in the same quarter of last year. Meanwhile the company reported cash flow from operations of $121M and capital expenditures of $12M.

“We were pleased to deliver Q1 revenue above the midpoint of our guidance range in a turbulent demand environment,” cheered Charles Liang, Chairman and CEO. “As expected, a number of our enterprise customers slowed their spending last quarter, but we are encouraged to see significant progress and growth with several high profile customers last quarter.”

The CEO added that he believes the Q1 results will mark a near-term bottom as the company aims to re-accelerate our growth through the remainder of fiscal 2021 and drive further growth in fiscal 2022.

Indeed, for the second quarter of fiscal 2021, SMCI is guiding for net sales of $780M to $880M, and non-GAAP net income per diluted share of $0.35 to $0.58. That’s vs the 798M consensus and $0.27 EPS estimate.

At the same time, Super Micro Computer’s Board of Directors authorized a new stock repurchase program for up to $50 million of its common stock.

The stock repurchase program is effective until October 31, 2021 or until the maximum amount of common stock is repurchased, whichever occurs first. SMCI had approximately 51,782,128 shares of common stock outstanding on October 31, 2020.

“The stock repurchase program reflects our ongoing commitment to creating value for shareholders,” said Liang. “We are currently taking an opportunistic approach to our stock repurchases while we continue to refine our longer-term capital allocation strategy.”

SMCI is currently trading down 3% on a year-to-date basis, and the stock scores a cautiously optimistic Moderate Buy Street consensus with 2 recent buy ratings. The average analyst price target indicates 68% upside potential lies ahead.

“We view the report and the guide as constructive. Near-term estimates are going higher despite lack of GM expansion, but we are also of the opinion that overall revenues could scale from here by as much as 2x given the capacity planned to come on line over the next year” commented Susquehanna analyst Mehdi Hosseini.

He reiterated his buy rating with a $38 price target post-print, writing: “The company has a mixed track record from the past, and that actually helps avoid inflated expectations. In this context, SMCI has an opportunity to regain investors’ confidence, and we believe it comes in small but consistent increments.” (See SMCI stock analysis on TipRanks)

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