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Investing.com - BofA Securities has lowered its price target on Super Micro Computer (NASDAQ:SMCI) to $34.00 from $37.00 while maintaining an Underperform rating on the stock. This new target represents the low end of analyst projections, according to InvestingPro data, which shows the stock has already fallen 10.04% over the past week.
The research firm cited concerns about Super Micro’s declining gross margins, which are expected to drop 300 basis points quarter-over-quarter to 6.5% in the December quarter. This margin compression is attributed to engineering costs, expedite costs, and overtime expenses as the company scales production of new Nvidia GPU racks, specifically the Blackwell Ultra. InvestingPro data confirms the company’s margin challenges, with current gross profit margins at just 11.06% over the last twelve months, supporting BofA’s concerns about further deterioration.
BofA Securities acknowledged Super Micro’s competitive advantage in the AI server market, noting its large manufacturing capacity and ability to ship thousands of liquid-cooled racks monthly. The firm expects Super Micro to generate strong revenue growth as long as AI-related capital expenditure remains robust. Indeed, InvestingPro data shows SMCI has achieved impressive revenue growth of 46.59% over the last twelve months, with analysts forecasting continued strong sales growth this year.
However, the research firm emphasized that the AI server market remains highly competitive, with large deals typically resulting in lower margins due to competitive bidding processes. BofA Securities warned that similar margin pressures could recur when subsequent generations of GPUs are launched.
The firm also noted that while sovereign computing remains a longer-term opportunity for Super Micro, the impact on gross margins remains unclear. Super Micro continues to work on remedying material weaknesses in its internal controls, according to the research note.
In other recent news, Super Micro Computer reported its first-quarter fiscal 2026 earnings, missing analyst expectations. The company announced earnings per share (EPS) of $0.35, which fell short of the anticipated $0.46. Revenue also missed projections, coming in at $5 billion compared to the expected $6.46 billion. Despite these results, Super Micro Computer raised its full-year 2026 revenue outlook. Following the earnings report, Raymond James lowered its price target for the company from $53 to $50, while maintaining an Outperform rating. Mizuho also adjusted its price target from $50 to $45, retaining a Neutral rating. Mizuho’s adjustment came after the company’s September quarter revenue of $5.02 billion, which was below the consensus estimate but aligned with Super Micro’s prior guidance. These developments have drawn attention from investors monitoring Super Micro Computer’s financial performance.
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