News

Super Micro Computer SMCI saw a 12.7% surge in its shares during after-hours trading on Mar 1, 2024 just after the announcement that the provider of AI-optimized servers would be included in the S&P 500 index.

The news puts focus on Super Micro-heavy ETFs like Invesco S&P MidCap Momentum ETF XMMO (SMCI’s exposure is 10.22%), iShares U.S. Digital Infrastructure and Real Estate ETF IDGT (SMCI’s exposure is 9.91%), Pacer Lunt MidCap Multi-Factor Alternator ETF PAMC (SMCI’s exposure is 8.22%) and Amplify Global Cloud Technology ETF IVES (SMCI’s exposure is 7.56%).

This decision, disclosed by S&P Dow Jones Indices, is part of the quarterly rebalance scheduled to take effect before the market opens on Monday, March 18. Super Micro and Deckers Outdoor Corp DECK will replace Whirlpool Corp and Zion Bancorporation in the index.

The addition of Super Micro and Deckers to the S&P 500 index will necessitate purchases of their shares by index funds that mirror the composition of the benchmark, which collectively manage approximately $7.8 trillion in assets, as reported by Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, per Reuters.

Why to Buy Super Micro-Heavy ETFs?

Super Micro's remarkable performance stems from its sales of high-end servers incorporating Nvidia's cutting-edge AI processors, contributing to its stock more than tripling in value this year. The stock has jumped 217.2% this year (as of Mar 1, 2024). With the company's market capitalization surpassing $50 billion, market watchers started speculating its inclusion in the S&P 500.

Friday saw substantial trading activity in Super Micro's shares, with nearly $10 billion worth exchanged, surpassing trading volumes of industry giants like Microsoft and Amazon. This after-hours surge complements the 4.5% increase observed during Friday's regular trading session.

Magnitude - Consensus Estimate Trend

Its earnings estimate for the upcoming quarter rose to $5.64 from $5.62 in the past seven days. Earnings growth for the March quarter is expected to be 246% over 204% revenue growth.

Price Target

Based on short-term price targets offered by eight analysts, the average price target for Super Micro Computer comes to $717.38. The forecasts range from a low of $250.00 to a high of $1,300.00. The average price target represents a decline of 17.17% from the last closing price of $866.12.

Broker Rating

Super Micro Computer currently has an average brokerage recommendation (ABR) of 1.89 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by nine brokerage firms. The current ABR compares to an ABR of 1.86 a month ago based on seven recommendations. Of the nine recommendations deriving the current ABR, six are Strong Buy, representing 66.67% of all recommendations. A month ago, Strong Buy represented 71.43%.

Are ETFs Better Bets?

While Zacks Rank #1 (Strong Buy) SMCI has more room to run, the stock lacks on value. Its value score is downbeat at “F” and growth score is also low at “D.” The stock has a moderate momentum score of “C.” Hence, the basket approach gives better protection against any kind of downside as the ETF lessens the company-specific risks.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.