JPMorgan Upgrades Super Micro Computer to Neutral, Raises Price Target to $45

JPMorgan analysts have upgraded Super Micro Computer Inc. (SMCI) from “Underweight” to “Neutral” while raising its price target to $45, up from $35. This move reflects the company’s recovery from previous uncertainties, particularly surrounding its pending SEC filings. Here’s a closer look at the factors behind this upgrade and what investors can expect moving forward.

Overcoming Regulatory Challenges

The primary reason for the upgrade stems from Super Micro’s ability to move past the uncertainty created by pending SEC filings. The company is now positioned to benefit from an increase in demand for its Blackwell-based server shipments, which are already outpacing the demand for previous generation models. This demand surge is expected to provide a significant boost to the company’s revenue.

Strong Demand and Higher ASPs

Super Micro is poised to take advantage of higher average selling prices (ASPs) as a result of stronger demand. This should translate into higher revenue as the company ramps up production and fulfills its growing order book. The upcoming year is expected to bring solid growth in the company’s topline, as well as more competitive advantages in the market.

Margin Concerns and Competitive Pressures

While revenue growth is promising, analysts caution about potential pressure on Super Micro’s margins. The company is facing an increasingly competitive environment, which could lead to pricing pressures that impact gross margins. Moreover, the company is incurring higher expenses as it works to improve its internal controls, which could further affect profitability in the near term.

Revenue Growth vs. Margin Trajectory

JPMorgan acknowledges the positive momentum in revenue, driven by a ramp-up in supply from Nvidia. However, concerns linger over the trajectory of gross margins. The firm predicts margin moderation in FY26 compared to FY25, which could result in slower earnings per share (EPS) growth, even if revenue continues to rise.

Adjusted Price Target and Peer Comparison

With the improved outlook, JPMorgan has raised its 12-month price target for SMCI to $45. This is based on a higher earnings multiple of 10x, up from the previous multiple of 9x. While this upgrade reflects optimism about the company’s growth prospects, the firm still applies a modest discount compared to peers like Dell, which is trading at an 11x multiple. This discount accounts for Super Micro’s historical issues with audits and SEC filings, as well as ongoing challenges such as a CFO change and internal control improvements.

Analyst Perspective

Analyst Samik Chatterjee shared that while Super Micro is on the right track with a strong revenue outlook, caution is advised due to the potential challenges ahead in maintaining margins. Investors should be mindful of the evolving competitive landscape and the company’s ongoing efforts to resolve its internal issues.

Conclusion: Positive Outlook with Caution

JPMorgan’s upgrade of SMCI highlights the company’s improving position, though potential risks remain. With a strong ramp-up in server shipments and higher ASPs, the company’s revenue growth is expected to be robust. However, concerns about margin pressures and the resolution of internal challenges are factors that investors should keep an eye on in the months to come.