Goldman Sachs Starts Coverage on Super Micro (SMCI) With Sell, $26 Target

Core Viewpoint - Super Micro Computer, Inc. (SMCI) is facing challenges in profitability despite its leadership in the AI server market, leading to a "Sell" rating from Goldman Sachs with a reduced price target of $26 from $34 [1][2]. Group 1: Analyst Coverage and Ratings - Goldman Sachs analyst Katherine Murphy initiated coverage on SMCI with a "Sell" rating and a 12-month target price of $26, reflecting a valuation of 9X NTM+1Y EPS, down from a previous target of $34 which was based on 11X [2]. - The analyst acknowledges SMCI's strength in the AI server market, particularly in tier 2 cloud markets, but expresses concerns over limited visibility into profitability levels [2]. Group 2: Margin and Profitability Concerns - SMCI's margin-dilutive deals have significantly impacted its profitability, halving its margin over the last three years to 9.5%, with expectations that this trend will continue in the short term [3]. - There are concerns that ongoing margin pressures and increasing competition from OEMs and ODMs will further limit visibility into SMCI's future earnings [4]. Group 3: Investment Perspective - While SMCI is recognized for its potential, the company is viewed as having less upside compared to other AI stocks that present greater investment opportunities with lower downside risks [5].