Happy Birthday! Super Micro Computer, based in Silicon Valley, is celebrating its 30th birthday this year. Recent developments show that Supermicro, as the company likes to call itself, is by no means old news. The server system architectures and technologies manufacturer has completed an extensive transformation into a provider of total IT solutions. The focus is essentially on the megatrends cloud, artificial intelligence (AI) and 5G.
Supermicro was founded three decades ago by Charles Liang in San Jose, California. In the meantime, the former start-up has developed into a global player that not only has more than 4,000 employees worldwide, but also has production and operating sites in Asia and Europe. Liang, who has a degree in electrical engineering, still directs the fortunes of the Group today as President and CEO - and continues to do so with great success. The best proof of this is the share price. In 2007, the shares were issued at USD 8.00 at the time of the IPO on Nasdaq; today, the papers are listed at USD 254.
Supermicro has seen particularly large price surges this year in the wake of the emerging AI hype. However, the rally - the stock market value has tripled to USD 13.3 billion since New Year's Eve alone - is not just about fantasy but about operational progress. For example, the company posted high growth rates in the 2022/23 fiscal year just ended (June 30). Revenue increased by USD 1.9 billion to USD 7.12 billion, with significant acceleration in the fourth quarter in particular. Supermicro's January-March revenues jumped to USD 1.28 billion in the final quarter ending June, reaching USD 2.2 billion. "Supermicro's record revenue and 37% year-over-year growth for fiscal 2023 validate our global leadership position in AI-accelerated computing platforms," CEO Liang commented.
On the earnings side, things went up even a beat faster. Net income added up to USD 640 million, which is 2.2 times the previous year's figure. Here, too, the Group set the main growth accents in the fourth quarter. Earnings per share (EPS) soared from USD 1.63 in the third quarter to USD 3.51 in the final quarter. This virtually pulverized the analysts' estimates, which averaged USD 2.96. A look at the company's history shows that this was a significant achievement. A look at the history shows that this is no flash in the pan. In the four quarters of fiscal 2022/23, expectations were exceeded three times. Meanwhile, the operating margin improved by 0.3 percentage points to 11%.
The outlook for the future is also positive, although the pace of growth will initially slow somewhat. For the current quarter, the company expects sales of between USD 1.9 and 2.2 billion, which corresponds to an increase of 7.8% in the middle of the range. EPS is expected in the range of USD 2.75 and 3.50, a USD 3.42 was generated in the comparable period. Even if the start is somewhat slow, business is expected to gradually accelerate. Full-year sales are estimated at USD 9.5 to 10.5 billion, representing an average increase of 40%. Meanwhile, the company did not publish a profit estimate for 2023/24. The analyst consensus assumes an EPS value of USD 16.58, which would also correspond to an increase of 40%.
CEO Liang sees growth opportunities especially in the area of artificial intelligence: "We continue to see unprecedented demand for AI and other advanced applications that require optimized rack-scale solutions. The already broad range of high-performance AI solutions was further expanded in early August with the addition of an E3.S storage solution. This is a technology that addresses the needs of large AI training clusters, where huge amounts of unstructured data need to be transferred to GPUs and CPUs to achieve faster results. This solution offer maximum performance, according to Liang, and is now shipping in large quantities worldwide.
The announcement doesn't change the fact that Supermicro stock has just gone into correction mode. In the wake of the somewhat weaker overall market, the stock fell sharply, while vola hopped into triple digits. This increased volatility can be cleverly converted into double-digit percentage returns with the new Softcallable Barrier Reverse Convertibles. The CHF version offers an attractive interest rate of 14.00% p.a. with a maximum term of one year, while the USD-denominated product even comes with a coupon of 17.00% p.a., which is paid out quarterly. In addition, the products are equipped with comfortable risk buffers of 45%. However, the safety mechanism is even higher: as it is a European barrier, it is only active at the final fixing. Consequently, the structure gives the share free rein during the term.
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