Investors should take full advantage of the current downturn in Super Micro Computer (NASDAQ:SMCI) and buy the stock. Super Micro Computer stock is going through a rough patch right now due to ongoing market volatility and a move away from highflying tech concerns.
Since July 18, SMCI stock has fallen 15%. The decline is due to sector rotation, not fundamental issues with Super Micro Computer. Investors should buy-the-dip in this leading AI play without hesitation.
Bullish Outlook
Even with the current pullback, Super Micro Computer stock has had an incredible run this year. Since January, SMCI stock has gained 150%. The stock continues to be the best performer in the benchmark S&P 500 index.
Analysts see plenty of upside ahead. The median price target on Super Micro Computer stock is nearly 40% higher than where the shares presently trade.
The stock’s surge is fueled by strong growth driven by demand for Super Micro Computer’s high-efficiency servers used for AI. In its May earnings report, Super Micro Computer reported that its revenue rose 200% year over year.
The company’s guidance for this year implies revenue growth of 582% at the midpoint. Super Micro Computer is scheduled to report earnings next on Aug. 6 and analysts are bracing for another blockbuster print.
Nasdaq 100 Inclusion
It might seem surprising, but 18 months ago Super Micro Computer was a small-cap stock trading on the Russell 2000 index.
The company’s growth has been so meteoric that earlier this year, its stock joined the S&P 500 for the first time, immediately becoming the index’s best performer.
More recently, SMCI stock was added to the Nasdaq 100 index, replacing Walgreens Boots Alliance (NASDAQ:WBA).
Super Micro Computer began trading on the Nasdaq 100 on July 22. The Nasdaq 100 is comprised of the 100 largest nonfinancial companies in the broader Nasdaq Composite index.
Super Micro Computer’s inclusion in the Nasdaq 100 is good news as mutual funds and exchange-traded funds that track the index are required to buy its shares.
The index additions come as Super Micro Computers’ market capitalization, which currently stands at $41.67 billion, has gotten too big to ignore.
Buy Super Micro Computer Stock
While shares of Super Micro Computer are dropping amid a broader market pullback, the current decline is not due to issues within the company.
On a fundamental basis, SMCI stock remains intact. The story surrounding the company also continues to hold up as demand for its servers that run AI remains white hot.
Upcoming earnings will be a test. If the company passes that test, its share price can be counted on to soar once again. For this reason, investors should buy-the-dip in Super Micro Computer stock.
On the date of publication, Joel Baglole did not have (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) and positions in the securities mentioned in this article.