Actions of Super microcomputer (NASDAQ:SMCI) And Intuition (NASDAQ:INTU) has jumped 10,740% and 2,220%, respectively, over the past 15 years. This price appreciation qualifies both companies as candidates for stock splits in 2024. More importantly, it tells investors that the companies must be doing something right. This type of outperformance doesn’t happen by chance and winners tend to keep winning. Famous investor Peter Lynch once said, “You want to let the winners run.”
Here’s why Supermicro and Intuit are interesting investments, whether or not the companies do stock splits this year.
Super Micro Computer: The market leader in artificial intelligence servers
Super Micro Computer builds high-performance servers and storage systems for enterprise and cloud data centers. Its products range from individual devices to complete rack-wide solutions. The company sources its chips, memory, interconnects and other hardware from suppliers such as Intel And AMDand he maintains a particularly close relationship with Nvidia.
Supermicro has differentiated itself through modular product development and in-house engineering. Specifically, it creates building blocks of servers that can be quickly equipped with cutting-edge chips and hardware, and handles most of the design and manufacturing in-house. These qualities often allow Supermicro to bring new products to market before its peers. Indeed, management plans to be the first to market with computing platforms featuring the latest Nvidia Blackwell graphics processing units (GPUs).
Another advantage of modular product development is that the basic server elements can be assembled in countless combinations, so Supermicro typically offers a wider selection of server and storage products than its peers. In other words, the company offers its customers more flexibility in designing personalized IT solutions.
Supermicro is by no means the leader in the server space. Dell Technologies holds this title. But the company took the lead in the field very early on artificial intelligence (AI) server market and is rapidly gaining market share. KeyBanc analysts estimate the company will account for 23% of AI server sales by the end of 2024, up from 10% at the start of the year.
Supermicro reported strong financial results for the third quarter of fiscal 2024 (ended March 31). Revenue grew 200% to $3.8 billion due to particularly strong demand for GPU-accelerated AI platforms, and non-GAAP (generally accepted accounting principles) net income jumped 308% to $6.65 per diluted share. Management also raised its guidance for the full year, predicting a 110% increase in revenue at the midpoint, up from 104% previously.
Looking ahead, Wall Street expects Supermicro to grow its earnings per share by 47% annually over the next three to five years. If we divide that figure by its current price-to-earnings ratio of 40.5 times non-GAAP earnings, the result is a very reasonable price-to-earnings-to-growth (PEG) ratio of 0.9. At this price, I think…
