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If you like the concepts underlying information technology (that) sturdy super microcomputer (NASDAQ:SMCI) – Who wouldn’t? – However, if you don’t want to pay “full retail price” then the Super Micro Computer alternative may be the best choice for you. These are ideas that are similar or related to SMCI stock in some tangible way, but with perhaps a better entry point.
Basically, investors are attracted to IT specialists. Because the IT specialist is one of the largest manufacturers of high-performance, high-efficiency servers. As a result, Super Micro shows surprising relevance to data centers, cloud computing, and, most importantly, artificial intelligence. However, some important drawbacks exist.
- evaluation: SMCI stock trades at nearly 58 times annual earnings, making it a very expensive stock.
- hot signal: Technical analysis gauges such as the Relative Strength Index are said to be overbought.
- psychology: At some point, investors may get cold feet out of fear of holding the bag.
It’s clear that Super Micro is an important cog in the broader field of digital innovation. But everything comes at a price, and for many investors, SMCI may have outweighed that. Therefore, these super microcomputer alternative picks may offer a good balance.
Dell Technologies (DELL)
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Touted as a leading provider of technology solutions; Dell Technologies (New York Stock Exchange:Dell) covers a wide range of connectivity innovations, including storage, networking, cloud computing, and servers. It is also one of the top super microcomputer replacement candidates due to its focus on areas such as cloud solutions and servers. One obvious difference, however, is in performance.
Since the beginning of the year, DELL stock has increased by a very respectable 15.3%. This compares favorably with SMCI, which jumped to a lead of over 159%. But what the Super Micro lacks are compelling metrics. For example, DELL’s forward earnings multiple is 12.29x. Meanwhile, SMCI is targeting a forward multiple of 36.56x.
Moreover, the top line situation is also deteriorating. Dell’s earnings multiple is 0.69x, while Super Micro’s earnings multiple is up to 4.57x. Indeed, the latter’s sales performance is much better than the former. But it’s still a significant premium to the bottom line. With SMCI earning so much, investors may think his Dell Technologies is a better value.
Hewlett Packard Enterprise (HPE)
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Another company touted as a global technology leader is hewlett packard enterprise (New York Stock Exchange:HPE) is focused on developing intelligent solutions that enable customers to capture, analyze, and act on data seamlessly from the edge to the cloud. The technology company also helps clients create new experiences for customers and employees, and improves operational efficiency for clients.
Like Dell Technologies, Hewlett Packard is also a potential replacement for super micro computers. In particular, the technology company is at odds with SMCI in the areas of high-performance computing and cloud computing. And like Dell, HPE just offers a better value proposition. The stock currently trades at 8.15 times forward earnings. Again, SMCI tips the scales by almost 37x.
Additionally, HPE trades at 0.71 times forward free cash flow (FCF). This is about 80% lower than the basic sector. On the other hand, SMCI is trading at 16.22 times forward FCF. This is higher than 97% of its competitors in the same sector.
To be fair, analysts have a consensus Hold price target for HPE at $18. Still, the implied growth rate he reaches more than 16%. This is much better than the approximately 26% downside risk suggested by SMCI.
Advanced Micro Devices (AMD)
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Let me be clear first, Advanced Micro Devices (NASDAQ:AMD) do not represent direct examples of alternative picks for Super Micro Computers. As a semiconductor specialist, Advanced Micro primarily focuses on processors used in a variety of devices such as computers and game consoles. It is also a huge player in the graphics processing unit (GPU) ecosystem, which makes it highly relevant to AI.
However, AMD does not directly conflict with Super Micro because Super Micro does not have a complete hardware solution. Nevertheless, AMD processors are integrated into many Super Micro servers. In fact, Super Micro frequently sends out press releases regarding their partnership with Advanced Micro.
So here’s some takeout. If you expect long-term success from SMCI, AMD stock is at least worth considering. Indeed, both underlying companies boast high valuation multiples. Still, AMD is showing a gradual subsidence of its chances compared to his SMCI, which is up just under 25% year-to-date.
Analysts also give AMD stock a consensus rating of Strong Buy. Only 5 of the 34 individual ratings indicate a hold, and we don’t see any sells. Finally, the average price target of $194.16 implies nearly 13% upside, and the $270 high target suggests nearly 57% growth.
Publication date, Josh Enomoto did not have any positions (directly or indirectly) in any securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.
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