Susquehanna Upgrades Super Micro Computer (SMCI) to Positive

Susquehanna upgraded Super Micro Computer (NASDAQ: SMCI) from Neutral to Positive with a price target of $33.00 (from $28.00).

Analyst Mehdi Hosseini commented, "Our earnings revision and upgrade are based on: (1) key challenges that besieged the company in CY15 are now behind us, while expectations are reset, (2) despite SMCI guiding to >20% revenue growth/year in FY16-17, we note that consensus (and our revised estimates) are much lower, suggesting that upside exists if SMCI executes on its target, (3) Data Center percentage of revenue is expected to increase from ~18% in FY15 to ~25% in FY16 and ~25-30% in FY17 (see Figure 2), (4) Next-Gen Storage and associated exposure to emerging players (i.e., Nutanix) is another layer of secular growth for SMCI, and we expect mix of total revenues from this segment to increase from 9% in FY15 to 10-15% in FY17, (5) the "platform agnostic" nature of SMCI's business model is expected to continue resonating with customers that are increasingly focused on reducing IT capex, and (6) the Broadwell Server product cycle starting this summer could also provide another (albeit small) layer of incremental business. We argue that SMCI's accounting missteps from CY15 are behind us, given the implementation of an SAP accounting system as well as adding internal resources. We acknowledge that macro-related downside risk exists, but we argue that SMCI's exposure to the secular trends noted above in a de-risked "platform-agnostic" manner positions the company favorably moving forward."

The firm revised FY16/FY17 EPS to $2.18/$2.35 vs. consensus of $2.20/$2.60.

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 $26.49 yesterday.

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