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Investing.com -- Raymond (NSE:RYMD) James has initiated coverage on Super Micro Computer (NASDAQ:SMCI) with an Outperform rating and a $41 price target, highlighting the company’s strong position in AI-optimized infrastructure and accelerating revenue growth.

AI platforms now account for nearly 70% of Supermicro’s revenue, making it a leader among branded server vendors.

The broker estimates Supermicro’s full-year 2026 (FY26) revenue at $29.8 billion with EPS of $3.03, representing a compound annual growth rate (CAGR) exceeding 25%.

“Supermicro has positioned itself in a sweet spot between the branded IT suppliers like Dell (NYSE:DELL) and Hewlett Packard Enterprise (NYSE:HPE), and contract manufacturers like Quanta,” Raymond James analysts wrote, underlining its ability to combine scale manufacturing with customized engineering.

Despite its impressive growth, Raymond James notes that the stock’s valuation is held back by performance lumpiness and concerns related to internal controls, which led to delayed SEC filings and auditor changes. However, the issue has been resolved, with no findings of misconduct.

Raymond James values SMCI using a blended multiple approach, applying an 11x price-to-earnings (P/E) to 2026 earnings, supported by the stock’s high growth profile relative to peers.

The firm’s bull case implies a $88 fair value, assuming “accelerating growth driven by improved share gains, and continued AI demand.”

While margins remain a concern—Supermicro reported a 9.7% non-GAAP gross margin in F3Q25 due to inventory write-downs—the bank expects improvement as the Nvidia (NASDAQ:NVDA) Blackwell GPU ramp progresses and economies of scale materialize.

“Customer mix will also influence margin, and we anticipate enterprises provide some relief to the pressure from tier 2 cloud providers,” the analysts said.

They also flagged the company’s customer concentration risk, with one customer representing 20% of sales in FY24, and pointed to limitations in enterprise services and financing capabilities compared to competitors like Dell and HPE.

Nonetheless, analysts view Supermicro as well positioned to benefit from ongoing AI infrastructure investment, particularly with the company expanding its U.S. manufacturing to produce 1,500 liquid-cooled AI racks per month.

While tariff risks and the ongoing trade disputes overhang the sub-sector, SMCI, unlike its competitors, has a substantial U.S. footprint, giving it an edge.

“While recent lumpiness tied to product transitions and limited enterprise services constrain valuation, we believe SMCI’s 25%+ revenue CAGR and expanding U.S. footprint support a re-rating,” the analysts said.

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