Home Mutual Funds Super Micro Computer Stock Rebounds 20% in Week Ahead of Its Quarterly Earnings

Super Micro Computer Stock Rebounds 20% in Week Ahead of Its Quarterly Earnings

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Key Takeaways

  • Super Micro Computer shares rebounded 20% last week ahead of the company’s earnings report due Tuesday, amid expectations of quarterly sales growth driven by soaring demand for artificial intelligence.
  • Analysts expect the company’s net sales to have grown more than 200% from last year’s corresponding quarter.
  • Super Micro Computer’s stock price price recently broke down below a head and shoulders pattern and the 50-day simple moving average, with the formation’s neckline in focus after the company reports earnings.

Shares of server and data storage provider Super Micro Computer (SMCI) remain in focus on Monday after recovering 20% last week ahead of the company’s earnings report due after Tuesday’s close, amid expectations of quarterly sales growth driven by soaring demand for artificial intelligence (AI).

Since reaching a record high in early March, the S&P 500 constituent stock has fallen as much as 45% over the past two months as investors may have used announcements of a share offering and the company’s decision to break away from its recent pattern of disclosing its preliminary results to take some profits off the table.

However, Super Micro Computer bulls returned from the sidelines last week to bid up the tech infrastructure company’s share price leading into earnings, halting three consecutive weeks of declines. Analysts expect Super Micro Computer to post fiscal third quarter net sales of $3.99 billion, indicating staggering top-line growth of 212% from last year’s corresponding quarter and a 9% jump from second quarter revenue of $3.66 billion.

Last week, KeyBanc analyst Tom Blakey presented his bull and bear case for the stock some market commentators are calling the next Nvidia (NVDA). The analyst anticipates Super Micro Computer shares climbing as high as $1,173 over the next year if AI use cases fuel accelerated infrastructure demand, helping the company expand capacity and grow its market share. However, Blakey put a price target on the stock at $268 if legacy server companies, such as Hewlett Packard Enterprise (HPE), Dell (DELL), and Lenovo (LNVGV) ramp up competition and demand for AI hardware weakens.

Taking a look at the chart, the share price broke down below a head and shoulders pattern and 50-day moving average earlier this month, indicating a potential top in the stock. 

After the company’s earnings release, investors could monitor if the price can close above the pattern’s neckline around $925, a move which could possibly lead to a retest of the all-time high reached in March this year at $1,229. A failure to reclaim this key chart level could spark another wave of selling down to the 200-day moving average, which currently sits at $478.90, around 44% below Friday’s closing price of $857.44.

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As of the date this article was written, the author does not own any of the above securities.

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