Supermicro actions were immersed after quarterly results.
The company continues to face intense margin pressure.
Although the stock is not expensive, it must find a better way to manage the transitions of chip architecture.
One of the most volatile stocks over the last year, Super Micro Computer(NASDAQ: SMCI) He continued his custom to make great movements after his actions took place after the pre-election company of tax gain results in the fiscal quarter. The action has lost approximately two -thirds of its value last year.
The action has been on a crazy Russian mountain trip since a short report came into question the company’s accounting and accusing it of other offenses. The delay of its annual report, an investigation reported on the company by the Department of Justice and the resignation of its auditor was only added to the intrigue.
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However, the company is now current with its files and full results reports, but it seems to be disappointing. Then I will take a further look at the Supermium announcement to see if this could be a shopping opportunity at the shares.
For those who do not know Supermium, it is a hardware integrator that designs and mounts servers and zipper solutions, which are fully configured systems that include network, cooling and integrated power. It was one of the first companies in the space to offer direct fluid cooling (DLC) in their configurations. The server hardware generates a lot of heat, especially when running artificial intelligence work (AI) and DLC offers some good advantages regarding traditional air cooling.
The company tends to build and customize its systems around Nvidias Graphic Processing Units (GPU)And he is a key partner of the original equipment maker (OEM) of the chip maker. As such, he has benefited very well from the Artificial intelligence (AI) Construction of infrastructure.
However, since the company is essentially an intermediary integrator, its business has a low gross margin. Despite the personalization it offers, it is in a mercantilized field with a low differentiation and intense competition. In the meantime, it is transmitting costs of very expensive components, such as GPUs, which influence revenue, but do not bring much gross benefits.
Although Supermicro is in a notorious gross margin business, it has still seen pressure on this front. This began to appear in its first fiscal quarter, which ended in June 2024, when its gross margin fell from 17% a year ago to 11.3%. At that time, the company said he had reduced prices in the search for new design wins. For the 2 q2 prosecutor, its tight dirty margin remained tensioned, reaching 11.9%.
For the most recent quarter of the company, gross margin problems did not disappear. In fact, they worsened. Supermicro said that its gross margin would be 220 basic points lower than the Q2 prosecutor, which would drop it to 9.7%. This was derived from the company that increased the inventory reserves in older generation products and then precipitated more generation products to customers.
Supermicro added that customers delayed the platform’s decisions, which moved sales to their first fiscal quarter. As a result, he reduced the forecast of revenue from the tax quarter of a rank of 5 billion to $ 6 billion to a new rank of $ 4.5 billion to $ 4.6 billion.
It also reduced the forecast for the adjusted action (EPS), bringing it from 0.46 to $ 0.62 to $ 0.29 to $ 0.31. One year ago, the company reported a tight EPS of $ 0.66 (dividing adjusted) with income of $ 3.85 million. So the growth of sales would be 18%, while EPS seems decreased to decrease.
Metric
Prior orientation of FQ3
New FQ3 guidance
Income
$ 5 billion to $ 6 billion
$ 4.5 billion to $ 4.6 billion
EPS tight
0.46 to $ 0.62
0.29 $ to $ 0.31
Source: Company Press Note
At the heart of supermico problems it seems that customers go to the new Blackwell Chip of Nvidia. Blackwell remains restricted to the capacity, but it seems that customers are now more willing to wait for Nvidia’s new chip architecture than to buy servers powered by older hopper chips. This could lead to a hopper inventory and a future discount.
This could be temporary in nature, but with Nvidia accelerating its new chip designs at about once every year, this dynamic could become a more common event. Supermicro will have to learn how to better manage their supply chain to more closely combine inventory and demand in the future during these periods of chip design transition.
Image Source: Getty Images
With a relationship with the head of children under 12, the estimates of the tax exercise analysts, the supermico actions are not expensive. However, due to its low dirty margin and the commercialized nature of its business, the company has not historically commanded a great multiple rating.
Supermicro is still configured to benefit from the creation of AI infrastructure, but will have to manage its current problems of inventory and margin. In the meantime, the actions continue to carry a luggage related to their brief accusations and the delay of presentation.
There are many actions for sale, given the recent market volatility. I think there are better ways to play the boom of the AI infrastructure.
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Geoffrey Seiler It has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Nvidia. The mold’s fool has a Outreach policy.
