Susquehanna Cuts Price Target on Super Micro Computer (SMCI) Following Quarter Results

Susquehanna maintained a Positive rating on Super Micro Computer (NASDAQ: SMCI), and cut the price target to $40.00 (from $48.00), ahead of 4Q15. SMCI reported June-quarter revenue of $574M, solidly above consensus of $524M. EPS of $0.57 compares to consensus of $0.56.

Analyst Mehdi
Hosseini commented, "SMCI's top-line beat and raise is encouraging though our excitement is tempered to some extent by: 1) softer margin profile due to the mix, and 2) potential of some channel inventory buildup (in the June quarter) - namely in the Subsystems business (+30% Q/Q in Jun Q). That said, we nonetheless view the revenue beat and raise as impressive in the context of a soft Enterprise IT spending environment. In fact, we believe SMCI is executing well on its Enterprise strategy (vis-a-vis higher-value SW and Services additions) as its Server revenue increased 17% Q/Q and 50% Y/Y, as well as gaining strong momentum in its Storage business (+79% Y/Y, +28% Q/Q). However, Data Center revenue declined 9% Q/Q. We are not entirely surprised here, as industry read-throughs that we summarized in our preview suggested a softer June-quarter cloud buildout environment. Moreover, while SMCI cash from operations usage in the June quarter was $54M, this in our view reflects the nature of the business (thousand shades of SKUs required to be ready for shipment). The $101M increase in A/R is also expected to be worked down in the ensuing September and December quarters. SMCI also gave a strong endorsement of its $3B revenue target for FY17, while offering a GM target of 16%-18% and OM target of 7%-9% (above prior target of 6%-8%). We are lowering our price target to $40 (from $48) to reflect a slight decrease in our FY16/FY17 EPS to $2.31/$2.47 from our prior estimates of $2.38/$2.60 and lower multiples given net cash of $0.02/share."

For an analyst ratings summary and ratings history on Super Micro Computer click here. For more ratings news on Super Micro Computer click here.

Shares of Super Micro Computer closed at $25.81 yesterday.

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