Performance
Company Background: Supermicro is an information technology company that provides market innovation for enterprise data centers, cloud computing, artificial intelligence, 5G telecommunication, edge computing, and IT infrastructure. Its goal is to bring Total IT solutions and a green computing mission to the world of data center systems.
Thesis
1: Total IT Solution
Company Information
Price: 98 37
52 Wk-Range: 34.11 103.98
YTD Return: 17.30%
IPO Date: March 2007
Mkt Cap: 5.28 B
Shrs Ostd: 53.6 M
Supermicro has rebranded itself as a company to provide an increased variety of IT services to businesses and customers. Its new motto of “Total IT” has given it the momentum to expand its products and services into the areas of cloud computing, artificial intelligence, 5G communications, and edge computing. In order to support these industries, Supermicro’s solution consists of advances in turnkey servers, storage, networking hardware, system management, and security software. This advancement is a drastic change from its past business model which sold a limited number of sub-systems and computer components that required modifications on the customer-end to accommodate businesses’ IT requirements.
Thesis
2: Green Computing & Energy Efficiency
Supermicro differentiates itself as the leading designer of technology components that are built for green computing and energy efficiency. As electricity costs continue to spike around the world, Supermicro’s mission of “Green computing” attracts businesses, customers, and investors. Around the world, the amount of electricity that data centers use per year is expected to grow between 2% and 8% by 2030. Supermicro’s servers are designed to require less energy at high levels of performance, reducing electricity consumption, carbon emissions, e-waste, and lowering costs for businesses. This is accomplished by disaggregated server architecture, resource sharing, free-air cooling and higher inlet temperatures, and servers ready for liquid cooling.
Thesis 3: H13 Server Solutions
Supermicro recently released their new generation of H13 Hyper Systems for data centers. Its portfolio of H13 systems support the new 4th Gen AMD EPYC processors, the latest cutting-edge server processor technology for businesses. The Supermicro server systems will transform how businesses perform complex simulations, test AI technology, and analyze enormous amounts of data. The servers are designed to manage any sort of enterpriserelated workload from intense machine learning to high-performance computing. Moreover, the servers follow the “Green computing” motto by reducing space in server racks and sharing power supply to improve efficiency.
Valuation: Undervalued
Supermicro’s current price target is valued at an average of 119.00, providing a possible 16.5% upside on an investment. The company’s 9.70 P/E ratio is cheap, resting below the industry average and that of many of its competitors. This signifies that Supermicro is undervalued, considering its YOY growth and potential to expand. Supermicro’s revenue topped $5.19 billion in 2022, revealing a net income of $285.16 million. The company’s TTM revenue is $6.64 billion, heading strong into the first quarter of 2023. The upward trend of Supermicro’s stock over the coming year will be catalyzed by its commitment to growing its Total IT services, support from green energy investors, and the release of new servers
Risks: Past Vulnerabilities
Past allegations of the Chinese state strategically infiltrating Supermicro’s server manufacturing department have strained the company’s integrity. These claims assert that Chinese government officials added tiny chips to Supermicro products that were sold to the US government and cloud computing company data centers. Allegedly, press sources state that the Department of Defense found thousands of servers sending network data to China via the chips on Supermicro motherboards. With a new generation of H13 system servers, supply chain hacking must be investigated to ensure the security of companies investing in Supermicro’s technology.