What happened
Shares of Super Micro Computer (SMCI +3.22%) were up 13% today as of 12:35 p.m. EDT. The data center and server hardware supplier that bills itself as an energy efficient technologist reported earnings for its first quarter of fiscal 2022 (the three months ended Sept. 30). Revenue and earnings per share (EPS) both easily surpassed what the average Wall Street analyst was expecting.
Specifically, sales were up 35% year over year to $1.03 billion, and adjusted earnings per share were up 5% to $0.58.
Image source: Getty Images.
So what
Demand for computing hardware is on the rise among large enterprises. With cloud computing quickly becoming the norm for IT operations, an upgrade cycle in data centers is under way. Super Micro is benefiting from this trend, and its efficient electronic equipment can help its customers cut down on energy consumption and carbon emissions. The company has a long-term goal of reaching $10 billion in annualized revenue as this massive corporate migration to the cloud plays out over the next decade.
With surging demand and a global chip shortage that is extending sales lead times, the current pace of Super Micro's growth is expected to continue for the foreseeable future. Management expects full-year fiscal 2022 revenue to be as much as $4.6 billion, a 29% increase over last year at the high end of guidance.
Now what
Super Micro had a great quarter, but a few things bear considering before piling into this stock. Super Micro -- which relies on semiconductor and other electronic component designers like Intel, Advanced Micro Devices, and Nvidia as key partners -- is a historically low-margin business. Gross profit margin was a meager 13% during the last quarter in spite of booming sales. The company has steadily grown its business over the years, but IT hardware sales are cyclical in nature, and Supermicro's profitability has remained thin at best even as it has expanded.
Nevertheless, with the stock trading at a respective 20 and 35 times trailing-12-month earnings per share and free cash flow, this stock might pique the interest of some value investors.
