Is Super Micro Computer Stock a Buy?

The hot artificial intelligence sector propelled many tech stocks upward in the past couple of years, among them server manufacturer Super Micro Computer (NASDAQ: SMCI), commonly known as Supermicro. Its shares soared to a split-adjusted 52-week high of $101.40 last June.

But a series of bad news battered the stock. Shares plummeted to a 52-week low of $17.25 by November. Since then, the company has put this tumultuous period behind it, and its share price has risen.

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Even so, the stock is down 66% over the past 12 months through April 17. Does this mean its shares are buying up? Or do reasons remain to steer clear? Let's dig into the company to find out.

Super Micro Computer's turbulent times

Supermicro's stock price drop this past year began in earnest when now-defunct short-seller Hindenburg Research accused the company of accounting manipulation in August. Then, management delayed filing its annual earnings report for the 2024 fiscal year, ended June 30. This was followed by its auditor resigning after raising concerns about the company's financial reporting.

As each of these dominoes fell, so did Supermicro's share price. The company risked having its stock delisted at that point, which already had happened once before, in 2018.

Management steadily addressed the issues. It gained a new auditor, accounting firm BDO. In December, a special committee investigating Supermicro's finances confirmed that the company's statements were accurate. In February, the company finally filed its annual report, along with two subsequent quarterly earnings statements.

With its challenges behind it, here's how Supermicro's business fared. In fiscal 2024, sales surged an impressive 110% over the prior year to $15 billion. The growth was due to Supermicro's server and data storage solutions, which were popular products to meet the hardware demands of AI systems. They contributed 95% of 2024 revenue.

After a successful fiscal 2024, that success extended into the first half of the company's 2025 fiscal year, ended Dec. 31. Revenue rose 100% once again to $11.6 billion, up from the previous year's $5.8 billion.

Super Micro Computer's era of growth

Supermicro's splendid sales gains enabled the company to end the first half of fiscal 2025 with net income of $744.9 million, up from $453 million in the prior year. As a result, diluted earnings per share (EPS) rose to $1.17 from $0.79 in the period.

The company's outstanding results so far in fiscal 2025 are a continuation of a multiyear stretch of sales and EPS growth. This period kicked off when businesses began investing in generative AI around the time OpenAI's ChatGPT debuted in 2022.

Data by YCharts; TTM = trailing 12 months..

However, Supermicro's streak of success is encountering a bump in the road. The company forecast fiscal 2025's full-year revenue to come in between $23.5 billion to $25 billion. While that's still significant double-digit growth over fiscal 2024's $15 billion, it's not the outsize sales jump seen in the last fiscal year.

The reason is that it can't keep up with customer demand. CEO Charles Liang said, "While most key components are ramping at full speed, it will take some time to fulfill our current AI solution backlogs."

The company has a new factory in Malaysia, but it will take time to get up to full capacity. As a result, Supermicro delivered a conservative revenue estimate for fiscal 2025.

Evaluating whether to buy Super Micro Computer stock

Supermicro's backlog is good news for investors focused on the long haul. As the company builds up more capacity to churn out products, it will be positioned to see increased sales growth.

In the short term, however, its shares are seeing a depressed valuation. Here's a look at Supermicro's price-to-earnings ratio (P/E), a way to tell how much investors are willing to pay for a dollar's worth of earnings.

Data by YCharts; PE = price to earnings..

Supermicro's P/E spiked in February after the company filed earnings reports that showed strong results. Since then, recent stock market volatility amid President Donald Trump's tariff plans have pushed down Supermicro's stock valuation.

Although it's not at the lowest point reached during the company's recent controversy, at the time of this writing, Supermicro's P/E ratio is lower than before the troubles began, suggesting shares are at an attractive price.

This, combined with strong sales and EPS growth and the prospect of future revenue expansion as it increases output, makes Supermicro a worthwhile long-term investment in my view. The compelling valuation, in particular, means now could be a good time to pick up shares.

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Robert Izquierdo has positions in Super Micro Computer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.