The Bottom Line:
- Super Micro Computer reported a 133% drop in pre-market trading due to an earnings miss, with Q4 earnings of $6.25 per share against the expected $8.07.
- The company’s gross margins fell 11.2% from 17.7% in the same quarter last year, and 15.5% from the previous quarter, raising concerns.
- However, the company did beat revenue expectations of $5.31 billion versus $5.30 billion, and its net income per share increased from $3.43 to $5.51 year-over-year.
- Super Micro Computer also announced a 10-for-1 stock split, which will take effect on October 1st, potentially providing a psychological boost for retail investors.
- The company’s forward guidance for Q1 FY2024 revenue of $6-7 billion and EPS of $5.59-$8.27 was higher than analyst expectations, suggesting continued growth potential.
Super Micro Computer’s Earnings Miss and Margin Decline
Earnings and Revenue Analysis
Super Micro Computer reported disappointing earnings for Q4, missing analyst expectations with earnings per share of $6.25 compared to the expected $8.07. However, the company did manage to beat revenue estimates, albeit marginally, reporting $5.31 billion against the expected $5.3 billion. Despite the revenue beat, the major talking point is the significant drop in gross margins, which fell to 11.2% from 17.7% in the same quarter last year and 15.5% in the previous quarter. This margin decline is a concerning sign for investors.
On a positive note, Super Micro Computer’s net income per share increased to $5.51 from $3.43 in the same quarter last year. The company also provided an optimistic revenue guidance for the next quarter, anticipating between $6 and $7 billion, surpassing Wall Street’s expectations of around $5.6 billion. The company’s EPS guidance range is quite wide, from $5.59 to $8.27, with a midpoint of $7.48, slightly lower than the analyst target of $7.58.
Stock Split Details and Impact
Super Micro Computer announced a 10-for-1 stock split, meaning that shareholders as of October 1st will receive 10 shares for each share they currently hold. It is important to note that stock splits do not change the fundamental financial aspects of the company; they simply make the shares more affordable for retail investors. For example, if a company’s stock is trading at $1,000 before a 10-for-1 split, the new price would be $100 per share. While stock splits can have a positive psychological effect on retail investors, they do not alter the company’s underlying value.
Market Reaction and Valuation
Following the earnings miss and the announcement of the stock split, Super Micro Computer’s shares plunged by 13.3% in pre-market trading, reaching $54.00. This significant drop has pushed the stock closer to its 52-week lows. Despite the negative market reaction, the company maintains a rare triple buy rating from Seeking Alpha, Wall Street, and Quant. When the market opens, the stock will likely trade at a lower forward P/E ratio, around the 14 to 15 range.
Investors should carefully consider the underlying metrics and valuation of Super Micro Computer before making investment decisions. The company’s free cash flow per share has been inconsistent on a year-over-year basis, although it is expected to increase to $13.30 over the next 12 months. Sales growth has been strong, with nearly double-digit growth every year, and the company has demonstrated significant numerical growth over the past decade. However, the inconsistent operating margins and the recent decline in gross margins are areas of concern that investors should monitor closely.
Revenue Beat and Improved Net Income per Share
Earnings and Revenue Analysis
Super Micro Computer reported disappointing earnings for Q4, missing analyst expectations with earnings per share of $6.25 compared to the expected $8.07. However, the company did manage to beat revenue estimates, albeit marginally, reporting $5.31 billion against the expected $5.3 billion. Despite the revenue beat, the major talking point is the significant drop in gross margins, which fell to 11.2% from 17.7% in the same quarter last year and 15.5% in the previous quarter. This margin decline is a concerning sign for investors.
On a positive note, Super Micro Computer’s net income per share increased to $5.51 from $3.43 in the same quarter last year. The company also provided an optimistic revenue guidance for the next quarter, anticipating between $6 and $7 billion, surpassing Wall Street’s expectations of around $5.6 billion. The company’s EPS guidance range is quite wide, from $5.59 to $8.27, with a midpoint of $7.48, slightly lower than the analyst target of $7.58.
Stock Split Details and Impact
Super Micro Computer announced a 10-for-1 stock split, meaning that shareholders as of October 1st will receive 10 shares for each share they currently hold. It is important to note that stock splits do not change the fundamental financial aspects of the company; they simply make the shares more affordable for retail investors. For example, if a company’s stock is trading at $1,000 before a 10-for-1 split, the new price would be $100 per share. While stock splits can have a positive psychological effect on retail investors, they do not alter the company’s underlying value.
Market Reaction and Valuation Considerations
Following the earnings miss and the announcement of the stock split, Super Micro Computer’s shares plunged by 13.3% in pre-market trading, reaching $54.00. This significant drop has pushed the stock closer to its 52-week lows. Despite the negative market reaction, the company maintains a rare triple buy rating from Seeking Alpha, Wall Street, and Quant. When the market opens, the stock will likely trade at a lower forward P/E ratio, around the 14 to 15 range.
Investors should carefully consider the underlying metrics and valuation of Super Micro Computer before making investment decisions. The company’s free cash flow per share has been inconsistent on a year-over-year basis, although it is expected to increase to $13.30 over the next 12 months. Sales growth has been strong, with nearly double-digit growth every year, and the company has demonstrated significant numerical growth over the past decade. However, the inconsistent operating margins and the recent decline in gross margins are areas of concern that investors should monitor closely.
10-for-1 Stock Split: Potential Boost for Retail Investors
Potential Boost for Retail Investors
Super Micro Computer’s announcement of a 10-for-1 stock split could potentially attract more retail investors to the company’s shares. The stock split, set to take effect on October 1st, will give existing shareholders 10 shares for each share they currently hold. While stock splits do not fundamentally change the financial aspects of the company, they can make the shares more accessible and appealing to retail investors.
For instance, if Super Micro Computer’s stock is trading at $1,000 before the split, the new price would be $100 per share after the 10-for-1 split. This lower price point may entice more retail investors to consider investing in the company, as the shares become more affordable. However, it is crucial to understand that the stock split does not alter the underlying value of the company or its financial performance.
Psychological Impact on Investors
Although stock splits do not directly affect the fundamental value of a company, they can have a positive psychological impact on retail investors. The lower price per share after the split may create a perception of increased affordability and potential for growth. This psychological effect can lead to heightened interest and trading activity in the stock.
However, investors should be cautious and not base their investment decisions solely on the stock split. It is essential to analyze the company’s financial health, growth prospects, and competitive landscape before making any investment choices. While the 10-for-1 stock split may attract more retail investors to Super Micro Computer, it should not be the only factor considered when evaluating the company as a potential investment opportunity.
Evaluating Super Micro Computer’s Fundamentals
Despite the potential boost in retail investor interest due to the stock split, it is crucial for investors to assess Super Micro Computer’s underlying financial metrics and performance. The company’s recent earnings report revealed mixed results, with a significant miss on earnings per share but a marginal beat on revenue. The most concerning aspect of the report was the substantial decline in gross margins, which fell to 11.2% from 17.7% in the same quarter last year.
Investors should carefully examine Super Micro Computer’s ability to improve its margins and maintain consistent profitability. The company’s free cash flow per share has been inconsistent on a year-over-year basis, although it is expected to increase in the next 12 months. On the positive side, Super Micro Computer has demonstrated strong sales growth, with nearly double-digit growth every year, and significant numerical growth over the past decade.
Positive Forward Guidance Signals Growth Potential
Positive Forward Guidance Signals Growth Potential
Despite the mixed earnings results and the concerning decline in gross margins, Super Micro Computer provided an optimistic revenue guidance for the next quarter. The company anticipates revenue between $6 and $7 billion, surpassing Wall Street’s expectations of around $5.6 billion. This positive forward guidance suggests that Super Micro Computer sees strong growth potential in the near future.
The company’s EPS guidance range is quite wide, from $5.59 to $8.27, with a midpoint of $7.48, slightly lower than the analyst target of $7.58. While the wide range indicates some uncertainty, the midpoint still suggests a healthy growth in earnings per share compared to the recent quarter.
Consistent Revenue Growth and Market Outperformance
Super Micro Computer has demonstrated consistent revenue growth over the past several years. The company’s Q4 revenue of $5.3 billion represents a significant increase from the same quarter last year, which saw revenue of $2.1 billion. This impressive year-over-year growth of over 100% highlights the company’s ability to expand its business and capture market share.
Moreover, Super Micro Computer has outperformed the industry growth rate over the last six years. The company’s growth rate has consistently surpassed the industry average, indicating its strong competitive position and ability to capitalize on market opportunities. This outperformance suggests that Super Micro Computer has the potential to continue its growth trajectory in the future.
Balancing Growth and Profitability
While Super Micro Computer’s revenue growth has been impressive, investors should also consider the company’s profitability metrics. The recent decline in gross margins is a concern, as it may impact the company’s overall financial performance. Super Micro Computer attributes this decline to customer and product mix, as well as initial production costs.
Investors should monitor Super Micro Computer’s ability to manage its costs effectively while maintaining its growth momentum. Balancing growth and profitability is crucial for the company’s long-term success. If Super Micro Computer can improve its margins while continuing to expand its revenue, it could create significant value for shareholders.
Evaluating the Current State of Super Micro Computer Stock
Earnings Miss and Margin Decline Raise Concerns
Super Micro Computer’s Q4 earnings report revealed disappointing results, with the company missing analyst expectations on earnings per share. While the company managed to beat revenue estimates, the marginal beat was overshadowed by the significant drop in gross margins. The decline from 17.7% in the same quarter last year and 15.5% in the previous quarter to 11.2% in Q4 is a concerning sign for investors, as it may impact the company’s overall financial performance.
Despite the earnings miss, there were some positive aspects to the report. Super Micro Computer’s net income per share increased to $5.51 from $3.43 in the same quarter last year, showing improvement in the company’s bottom line. Additionally, the company provided an optimistic revenue guidance for the next quarter, anticipating between $6 and $7 billion, which surpasses Wall Street’s expectations of around $5.6 billion.
Stock Split Aims to Attract Retail Investors
Super Micro Computer announced a 10-for-1 stock split, which will take effect on October 1st. Shareholders will receive 10 shares for each share they currently hold. While stock splits do not directly impact the fundamental financial aspects of the company, they can make the shares more accessible and appealing to retail investors.
For example, if Super Micro Computer’s stock is trading at $1,000 before the split, the new price would be $100 per share after the 10-for-1 split. This lower price point may attract more retail investors who find the shares more affordable. However, it is crucial to understand that the stock split does not alter the underlying value of the company or its financial performance.
Evaluating Super Micro Computer’s Growth and Valuation
Investors should carefully assess Super Micro Computer’s underlying metrics and valuation before making investment decisions. The company’s free cash flow per share has been inconsistent on a year-over-year basis, although it is expected to increase to $13.30 over the next 12 months. On the positive side, Super Micro Computer has demonstrated strong sales growth, with nearly double-digit growth every year and significant numerical growth over the past decade.
Following the earnings miss and the announcement of the stock split, Super Micro Computer’s shares plunged by 13.3% in pre-market trading, reaching $54.00. This significant drop has pushed the stock closer to its 52-week lows. Despite the negative market reaction, the company maintains a rare triple buy rating from Seeking Alpha, Wall Street, and Quant. When the market opens, the stock will likely trade at a lower forward P/E ratio, around the 14 to 15 range.
