Super Micro Computer(NASDAQ: SMCI) stock has been riding the artificial intelligence (AI) wave that Nvidia started. That makes sense to some extent. Super Micro provides the computer stacks for data centers that run the AI content powered by Nvidia's chips and software.
But Super Micro stock plunged more than 20% today, as of late Friday afternoon trading. Even so, the stock has soared by more than 150% so far this year. So investors might be wondering whether it's time to take those profits, or if today's plunge means the stock is now a bargain.
Super Micro is not Nvidia
Today's stock drop may have occurred for an interesting reason. The company didn't provide investors any news -- that is, except for the news release that told investors that Super Micro would be reporting its fiscal 2024 third-quarter earnings on April 30. But what was interesting was that was the only news release.
In seven of the past eight quarterly periods, the AI hardware company has also preannounced its financial results, mostly to prepare investors for a better-than-expected report. Now investors fear that the upcoming report won't include a positive earnings surprise.
Super Micro previously told investors to expect revenue of between $3.7 billion and $4.1 billion for the quarter. The Wall Street consensus is for sales of about $4 billion and earnings of $5.84 a share. That compares to sales of about $3.7 billion and net income per common share of $5.10 in its prior fiscal second quarter.
But investors have been expecting more, as shares have more than doubled in just the past three months. That said, Super Micro wasn't going to ride Nvidia's AI coattails forever. Even as sales have surged with the boost from data center growth, Super Micro reported a gross profit margin of just 15.4% in its most recent quarterly report, down from 16.7% in the prior-year period. Its products are more of a commodity than Nvidia's difficult-to-get chips.
Today's drop implies investors may be thinking this will be the quarterly report where that will become more apparent.
Should you invest $1,000 in Super Micro Computer right now?
Before you buy stock in Super Micro Computer, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Super Micro Computer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 15, 2024
Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
