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TheStreet Open House

Why Super Micro Computer (SMCI) Spiked on Wednesday

Stocks in this article: SMCI

NEW YORK (TheStreet) -- Super Micro Computer (SMCI) spiked on Wednesday morning following better-than-expected second-quarter earnings a day earlier. By mid-morning, shares had surged 15.7% to $21.41.

The server manufacturer reported net income for the quarter ended December of 35 cents a share, 9 cents higher than analysts surveyed by Yahoo! Finance had anticipated. Revenue of $356.4 million came in 22.3% higher than the year-ago quarter.

For the third quarter ending March, management expects net income between 24 cents and 30 cents a share and revenue in the range of $320 million to $350 million. Prior to guidance, analysts anticipated third-quarter net income of 25 cents a share on $317.36 million in revenue.

"We are looking forward to strong growth in calendar 2014 because of our foundation in global capacity and in strong product innovation," said CEO Charles Liang in a statement.

TheStreet Ratings team rates SUPER MICRO COMPUTER INC as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate SUPER MICRO COMPUTER INC (SMCI) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 14.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although SMCI's debt-to-equity ratio of 0.09 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 756.4% when compared to the same quarter one year prior, rising from $0.90 million to $7.70 million.
  • Net operating cash flow has significantly increased by 168.94% to $18.31 million when compared to the same quarter last year. In addition, SUPER MICRO COMPUTER INC has also vastly surpassed the industry average cash flow growth rate of 6.77%.
  • Powered by its strong earnings growth of 750.00% and other important driving factors, this stock has surged by 79.00% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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