Super Micro Computer Stock Lost 20%, Buy Or Wait?
Super Micro Computer (SMCI) stock is down 19.9% in 5 trading days. Already own the stock? You might want to consider holding it. Planning to buy? This might be your opportunity. Consider the following data:
- Size: Super Micro Computer is a $24 Bil company with $22 Bil in revenue currently trading at $40.34.
- Fundamentals: Last 12 month revenue growth of 46.6% and operating margin of 5.7%.
- Liquidity: Has Debt to Equity ratio of 0.2 and Cash to Assets ratio of 0.37
- Valuation: Super Micro Computer stock is currently trading at P/E multiple of 23.0 and P/EBIT multiple of 19.0
- Has returned (median) 37.1% within a year following sharp dips since 2010. See SMCI Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for SMCI, see Buy or Sell SMCI Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and SMCI drops another 20-30% to $28 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
A single stock can be risky, but there is a huge value to a broader, diversified approach. Quiz time: Over the last 5 years, which index do you think the Trefis High Quality Portfolio outperformed — the S&P 500, the S&P 1500 Equal Weighted, or both? The answer might surprise you. See how our advisory framework helps stack the odds in your favor.
Below are the details, but before that, as a quick background: SMCI provides high-performance modular server and storage solutions, including servers, blades, racks, and networking devices for enterprise data centers, cloud computing, AI, 5G, and edge computing markets.
2022 Inflation Shock
- SMCI stock fell 34.5% from a high of $35.33 on 7 August 2023 to $23.15 on 21 September 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 19 January 2024
- Since then, the stock increased to a high of $118.81 on 13 March 2024 , and currently trades at $40.34
| SMCI | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -34.5% | -25.4% |
| Time to Full Recovery | 120 days | 464 days |
2020 Covid Pandemic
- SMCI stock fell 45.8% from a high of $2.95 on 5 February 2020 to $1.60 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 8 June 2020
| SMCI | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -45.8% | -33.9% |
| Time to Full Recovery | 82 days | 148 days |
2018 Correction
- SMCI stock fell 59.6% from a high of $2.89 on 4 January 2017 to $1.17 on 8 November 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 22 January 2020
| SMCI | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -59.6% | -19.8% |
| Time to Full Recovery | 440 days | 120 days |
2008 Global Financial Crisis
- SMCI stock fell 66.3% from a high of $1.14 on 5 June 2007 to $0.39 on 13 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 22 December 2009
| SMCI | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -66.3% | -56.8% |
| Time to Full Recovery | 404 days | 1480 days |
It is a good thing to keep in mind how low SMCI could go during a downturn. And you should also check how the stock fared when compared with the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 — the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.