Loop Capital Defends Super Micro (SMCI), Asserting It Remains ‘A $1,000 Stock’

Analysts at Loop Capital have reiterated their optimistic outlook on Super Micro Computer, maintaining a Buy rating and forecasting that the stock could reach $1,000 (prior to a 10-for-1 stock split) despite the recent news of an inquiry by the U.S. Department of Justice (DOJ).

In their analysis, Loop Capital minimized the potential ramifications of the DOJ investigation, which was initially reported by a leading news outlet. The analysts suggested that the inquiry likely pertains to shipments to countries like China and Russia, but stressed that this situation might not disrupt the company’s day-to-day operations.

The analysts noted, “Super Micro would be able to continue with its processes, including filing the 10-K, while addressing matters related to the DOJ separately.” They also indicated that the company may have been aware of the DOJ’s investigation prior to the news breaking.

Although Super Micro has not publicly acknowledged the inquiry, the analysts observed that management appeared “constructive” during recent investor events held in September. This implies that the company may have been preparing for this scenario behind the scenes. “We believe there is a legitimate possibility Super Micro was already aware of any developments concerning the DOJ,” they remarked.

Loop Capital continues to have faith in Super Micro’s long-term prospects, projecting normalized revenues of $40 billion alongside a return to 14% gross margins and 10% operating margins. The analysts argue that this trajectory could result in a normalized earnings per share (EPS) of $50 and a price-to-earnings (P/E) ratio of 20x, reinforcing their position that Super Micro is indeed “a $1,000 stock.”

In conclusion, despite the cloud of uncertainty surrounding the DOJ inquiry, Loop Capital acknowledged, “This is admittedly not a 100% visibility situation,” but they still see significant potential for growth for Super Micro.