Supermicro initiated with a Buy at Needham

Needham initiated coverage of Supermicro with a Buy rating and $600 price target. The firm views Supermicro as a first mover in the design of GPU-based compute systems and liquid cooled rack level solutions and “significant beneficiary” from growing investment in AI infrastructure, the analyst tells investors. Needham forecasts a compound annual revenue growth rate in excess of 55% from FY21 to FY26, though it adds that it models a gross margin recovery that is “more conservative than management’s forecast.” However, the firm believes the bear case that gross margin will trend towards the single digits is “too pessimistic.”