Super Micro Computer (NASDAQ:SMCI) continues to lead the technology sector in 2024. The semiconductor equipment manufacturer has lost half its value since its March peak.
Although Super Micro Computer stock is a good long-term buy, expect to be able to get better prices on its shares after it reports earnings on Aug. 6. There isn’t anything wrong with the maker of GPU servers, high performance computing and rack-scale solutions for data centers. Indeed, the runway for growth in this market is long. However, the market looks like it is in for a bit of turbulence and will likely drag down the current high-fliers.
The Coming Crash
The signs of a crash are ominous. Warren Buffett just sold off a huge tranche of stock. He just cut his stake in Apple (NASDAQ:AAPL) in half to move to a massive $277 billion cash position. He seems to know something is awry.
Also, Japan’s stock market just collapsed. It suffered its largest one-day loss ever, tumbling 7% for the session. Further, Japan banks just had their worst single-day losses since the financial markets crash in October 2008.
In pre-market trading today, Dow Jones Industrial Average futures plummeted 800 points. Concerns about the U.S. economy plunging into a recession are now at the highest levels. Savvy investors should have been preparing for this moment. If you were paying attention like Buffett, you have a lot of cash on hand.
That’s perfect because there are about to be a lot of deeply discount bargains soon and Super Micro Computer may be one of them.
Fighting Against the Tide
Make no mistake, the semiconductor equipment maker’s second quarter earnings will undoubtedly look good. The data center build-out is under way due to the influence of artificial intelligence. So, the need for AI powered servers and high-performance computing will continue driving Super Micro Computer’s growth in the quarters and years ahead.
The problem for Super Micro Computer stock will be fighting the tide of a market rout. If the economy is heading into a recession and the stock market does fall, SMCI stock will fall with it.
The tech stock was already showing the wear and tear of investors rotating out of the tech sector into more consumer staple stocks. Super Micro Computer stock is down 26% in just the last month.
Yet because its business is not broken and the decline is not due to a problem with its operations, it remains a viable long-term stock to buy. Just not yet.
Patience Is a Virtue
Analysts forecast Super Micro Computer’s fiscal fourth quarter revenue will come in at $5.3 billion, up 143% from the year-ago period, generating $8.10 per share in earnings. That’s a 130% year-over-year (YOY) increase. Over the last four quarters, the computer equipment company has handily beaten profit estimates by 15% on average.
Chances are good that SMCI will do so again this quarter. But it may not be enough to offset the wave of doubt washing over Wall Street.
So here is an opportunity for investors to exhibit patience. While there is a chance Super Micro Computer stock will be able to swim against the tide and rise, I’d still be cautious until all the tremors and aftershocks of the macroeconomic events subside before buying.
Super Micro Computer is a good company to own. You just may be able to buy it at a better price if you hold off on pulling the trigger.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
