One shouldn’t start reading threads about new companies on days off; you might accidentally spend the whole day looking into them. This is certainly an interesting case!
It seems it hasn’t stirred up much thought among forum members yet; thanks @karhulalainen for opening the thread and keeping it active. Based on my surface-level scratch, I’d perhaps want to distance myself from the idea of it being a “little NVIDIA”—after all, the companies operate at completely different stages of solution creation, and Supermicro also provides solutions unrelated to GPU computing. Of course, an essential part of SMCI’s product mix is GPU-intensive solutions, and the company packages NVIDIA’s hardware into ready-made rack-level solutions to meet those specific needs.
Supermicro’s market can probably be outlined through its competitors; the most significant ones are likely Dell, HPE, and Lenovo, and one Seeking Alpha article also brought up IBM and Cisco as peers. This article provides a good basic overview of the company, and it was also the only one I could read with free credentials—worth a look for those getting to know the firm:
https://seekingalpha.com/article/4566545-super-micro-computer-super-financials-and-undervalued
IDC collects and publishes (apparently paid?) tracking of the server market; I found a free excerpt from one publication. Super Micro was around the fifth-largest server unit supplier by volume around the third quarter of 2021, but this data is starting to get quite old. In any case, a small sample for those interested in the market is here:
https://www.idc.com/getdoc.jsp?containerId=prUS48221821
It’s still a mystery to me what makes Supermicro’s racks better than those of its competitors, but the results speak for themselves. I must admit, a clearer understanding of the entire company’s offering is still somewhat obscured. I’ll highlight some picks from the latest quarterly presentation Q1/23, which can be found via the link below. Note: a non-standard fiscal year that ends in June.
https://s25.q4cdn.com/632471818/files/doc_financials/2023/q1/Earnings-Deck-Q1FY23-Final.pdf
Supermicro’s market growth has apparently fluctuated on a quarterly basis between -10% and 20% in recent years, but SMCI has broken away from the industry average and blasted out a modest 80% growth last quarter.
An essential part of sales consists of complete systems, but this new segment, “Total IT Solutions,” is growing rapidly and seems to be the component embracing the future. I don’t quite know the exact difference between “complete systems” and “total IT solutions” yet, as both seem to include entire racks.
Production capacity is being increased rapidly, and for now, the current capacity also seems to be scaling well. Production facilities are found at least in the United States, Taiwan, and the Netherlands, with new openings apparently coming to Mexico and Malaysia as well.
Then there’s the numerical side that caught my interest. Firstly, the company’s valuation, just over $4 billion, has only recently pushed Supermicro into the mid-cap category, which is presumably still under the radar for the majority of the investing public. Even though I’m looking at a market (stock market) that’s less familiar to me, I’d venture to guess that the retail investor still has an advantage before the big money potentially gets interested later. The share price has certainly woken up already, but in light of the multiples, we’re still in quite relaxed territory, especially by US standards. P/E TTM looks to be around 10, and P/E based on 2022 earnings is 15.7.
The numbers have grown at a steady, fast pace over the last year, and at least for the previous year, the average guidance has also been regularly exceeded. Whether this is just how things are done there or if the market is also exceeding internal expectations, I don’t know. Anyway, EPS in particular has grown tremendously as margins have improved, and there’s no end in sight.
Cash flow turned heavily positive in the previous quarter. The discrepancy between previous cash flow and earnings should be dug into more, but my guess would be it’s due to investments. The balance sheet, however, seems healthy.
The forecast is pure honey for the market. Revenue for the current fiscal year is guided at $6.5 – $7.5 billion ($5.2bn FY2022) and EPS is a whopping $9 – $11.30 ($5.65 FY2022), which has already been significantly raised from the Q4/21 guidance of “At least $7.50.”
As a longer-term guidance, the CEO spoke in the 2021 annual report about reaching $10bn in revenue within a 3–5 year timeframe. The annual report can be found here:
https://s25.q4cdn.com/632471818/files/doc_financials/2021/ar/154013_PROOF-ONLY_DY_lo-res_Revised-Letter.pdf
I’d guess the dividend policy pleases most forum members; Super Micro Computer has not paid dividends in its history. I didn’t see any major mentions of buybacks at a quick glance, although news was found from last August about a $200M buyback program valid until January 2024.
Finally, some video materials; I didn’t really pick out anything special from these, but you get a bit of a feel for Supermicro’s founder and CEO. He seems like a laid-back guy and appears alongside AMD’s CEO as an equal; for me, only his strong accent occasionally makes it difficult to interpret his speech. Green values are strongly featured, especially in the name of energy efficiency, but in the case of servers, this translates into very tangible value due to lower electricity bills and easier-to-implement cooling.
