SMCI Bold Thesis: Why SMCI Could Surge After Q3 FY25 EarningsSMCI) is trading at $32.71 and looks ready for major volatility—with the potential for a sharp move upward.
THIS IS NOT FINANCIAL ADVICE, just a breakdown of key data, risks, and upside potential based on recent developments and my research.
Snapshot: Key Stats
• Current Price: $32.71
• Market Cap: $19.01B
• P/E Ratio: 15.77 (trailing), 12.22 (forward)
• Short Interest: 17.36% (103.6M shares)
• Daily Volatility: 8.44%
• Beta: 1.22 (more volatile than the broader market)
Q3 FY25 Preliminary Results (Announced Apr 29)
• Revenue: $4.5B–$4.6B (missed 5.41B consensus and 5B–6B guidance)
• EPS: $0.29–$0.31 (missed $0.54 consensus)
• Gross Margin: Down 2.2% (~$100M hit)
o Inventory Write-Offs (~70%, ~70M): Older server components likely became outdated due to Nvidia Blackwell transition.
o Expedited Costs (~30%, ~30M): Faster AI product rollouts raised short-term costs.
FY25 Revenue Guidance: Maintained at $23.5B–$25B
Why SMCI Could Pop
1. Short-Term Miss, Long-Term Setup:
The Q3 miss may be due to deferred revenue—possibly ~1B from delayed orders (e.g., tariffs, shipping delays). If these orders land in Q4, SMCI could post 7B revenue and ~$0.45 EPS, helping hit their FY target.
2. Short Squeeze Risk:
With 17.36% of shares shorted, a strong Q3 beat (EPS est. is $0.43) or raised Q4 guidance could trigger short covering. That could send the stock to $65–$70 2 weeks. It's aggressive, but SMCI has rallied this way before.
3. Analysts Are Bullish:
Average target: $54.59 (range $15–$130), with some 17 analysts rate it a “Buy.” Strong Q3/Q4 numbers could push their revised targets into the $60–$80 range.
4. AI Server Demand Remains Strong:
Despite Q3’s margin hit, SMCI remains a leader in AI server infrastructure. Progress on Nvidia Blackwell server launches could reignite enthusiasm.
Why SMCI Could Dip
1. Margin Pressure:
Q3 margins took a 220-bps hit due to write-offs and accelerated spending (a 220-basis-point drop translates to $99–$101M in lost margin (e.g., 2.2% of $4.55B = ~$100M). If margins don’t recover in Q4, investor confidence may fade.
2. Tariff Overhang:
A possible 25% electronics tariff could raise costs or disrupt demand—especially if mentioned during the earnings call.
3. High Volatility:
Daily swings over 8%, and a 1.22 beta mean post-earnings moves could be wild. Profit-taking could cut into any short-term rally.
Valuation Check
• Target Price if Q4 Delivers:
Using a conservative 14x P/E and FY26 EPS estimate of $3.75 → $52.50 fair value.
• Support Zone:
If it drops, look for buying interest around $31.86.
Final Thoughts
The way I see it, SMCI is a classic high-risk, high-reward trade.
If they beat Q3 expectations or give strong Q4 guidance, the combination of AI demand + high short interest could fuel a run toward $65–$70. But weak margins or tariff concerns could derail that. If you're trading this, consider using a tight stop-loss ($31–$32) to manage risk.
What’s your take—bullish on a bounce or cautious on the miss?
AGAIN NO FINANCIAL ADVICE !!!
