Does Supermicro's Pre-Announcement Signal More Pain For Software Earnings?

Last week, Super Micro Computer, Inc. SMCI pre-announced some disappointing Q1 revenue numbers. But what does the company’s weak Q1 mean for its stock and for other software companies that will report Q1 earnings this week?

Clearly the market was disappointed with the news of Q1 revenue in the $530-530 million range, the very low end of the previous guidance of $530-580 million. The stock dropped 19.6 percent during Friday’s session, but Stifel analyst Aaron Rakers sees the sell-off as a buying opportunity.

“We believe Supermicro remains favorably positioned for growth in the cloud/hyper-scale data center market, next-gen storage, and high-performance computing,” Rakers explained. Stifel has initiated Super Micro at Buy with a $40 price target.

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ROTH Capital Partners analyst Brian Alger agrees that investors should be buying the dip.

“We believe our investment thesis for SMCI remains intact and that while we are disappointed in the adjusted guidance, we continue to see tremendous opportunity for SMCI to rebound not only in the June quarter, but in the future quarters as well,” Alger notes.

ROTH also maintains a Buy rating and $40 price target for the stock.

Investors will be watching closely to see if Super Micro’s weak Q1 is a preview of the type of revenue weakness that larger software companies International Business Machines Corp. IBM and Intel Corporation INTC could be reporting this week.

Disclosure: the author holds no position in the stocks mentioned.