Market Overview

DA Davidson Upgrades Super Micro Computer Despite Tough Comps


D.A. Davidson upgraded Super Micro Computer, Inc. (NASDAQ: SMCI) to Buy from Neutral on margin benefits from success of server sales outside the Internet Data Center vertical, while the company is set to deliver a seasonally strong quarter in December.

The bullish thesis is also based on growth in storage business and a pending server upgrade cycle in mid-2017 in the form of Sky Lake.

The upgrade comes despite SMCI faces a difficult year-over-year comparison for December, as the December 2015 quarter included a large deployment for IBM/Softlayer, which accounted for 15 percent revenue in the quarter.

But, this year, the Softlayer division of International Business Machines Corp. (NYSE: IBM) is lumpy and the brokerage expects non-IBM/Softlayer revenue to increase 12 percent.

On the storage front, the brokerage pointed out that SMCI has become the "hardware platform of choice" onto which many new storage vendors are building storage management software stacks. Last quarter, storage sales represented 23.5 percent of revenue, up from 17.6 percent last year.

“With fast-growing storage vendors such as Nutanix Inc (NASDAQ: NTNX), Nimble Storage Inc (NYSE:NMBL), and Nexenta building software on SMCI hardware, we believe the storage vertical should continue to drive top line growth,” analyst Mark Kelleher wrote in a note.

Kelleher also expects SMCI to deliver improved margins as growing demand should help drive revenue and utilize the excess manufacturing capacity is utilized. Last quarter, the gross margin improved 101bp sequentially, while operating margin moved to 4.7 percent from 3.1 percent.

Shares of SMCI closed Tuesday’s trading at $26.10.

Latest Ratings for SMCI

Jun 2020Northland Capital MarketsInitiates Coverage OnOutperform
Jun 2020Loop CapitalInitiates Coverage OnBuy
Feb 2020SusquehannaReinstatesPositive

View More Analyst Ratings for SMCI
View the Latest Analyst Ratings


Related Articles (SMCI)

View Comments and Join the Discussion!

Posted-In: D.A. Davidson Mark KelleherAnalyst Color Upgrades Price Target Analyst Ratings

Latest Ratings

TSLAJP MorganMaintains125.0
INTCTruist SecuritiesMaintains64.0
FBTruist SecuritiesMaintains320.0
AAPLCowen & Co.Maintains153.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at