The momentum driving Super Micro Computer's (SMCI +0.56%) sharp rise is continuing Wednesday. Supermicro shares rose as much as 7% in morning trading and were still about 4% higher by mid-afternoon. Those gains came in the wake of an earnings report from cybersecurity leader CrowdStrike that impressed Wall Street and strengthened the notion that demand for computing power is continuing to increase.
The stock has delivered a remarkable 300% jump year to date, and Supermicro and its insiders are taking advantage. Other investors may want to do the same.
NASDAQ: SMCI
Key Data Points
Capitalizing on the SMCI stock jump
Supermicro stock has been moving higher for good reason. Its artificial intelligence (AI) server products are in high demand as AI technologies transform how businesses operate. Sales more than doubled year over year in the most recently reported quarter, and the company sees that growth continuing.
Much of the anticipated growth is already priced into the stock, though. Even its forward price-to-earnings ratio is over 50. So growth will have to exceed estimates for some time to bring the stock's valuation more into line with historical market levels.
That may help explain why the company -- and some of its executives -- are making moves to take advantage of the stock's rise. On Feb. 27, Supermicro announced it had raised about $1.7 billion from the sale of convertible senior notes. That was a smart move, as the company was able to find a buyer of the bonds at a zero interest rate.
Another company filing from last week showed that one company director sold some shares. Director Daniel Fairfax has now sold more than 1,200 shares over the last year. Over the past year, there have been 29 insider stock sales, but only four insider buys.
Insiders sell shares for many reasons, including personal ones, so these moves shouldn't raise any alarms for investors. But given that its current share price already factors in a meaningful amount of hoped-for future growth, retail investors who have Supermicro shares in their portfolio should also think about taking profits by selling at least a portion of them.
