of stocks Super Microcomputer (NASDAQ:SMCI) and Intuit (Nasdaq: INTU) Over the past 15 years, their stock prices have risen by 10,740% and 2,220%, respectively. This increase in stock prices makes both companies candidates for a stock split in 2024. More importantly, both companies must be doing something right for investors. This kind of outstanding performance doesn't happen by chance, and winners tend to keep winning. Famous investor Peter Lynch once said, “I want to let my winners run.”
Here's why Supermicro and Intuit are worth investing in, whether or not they split their stocks this year.
Supermicrocomputer: Market leader in artificial intelligence servers
Supermicro builds high-performance servers and storage systems for enterprise and cloud data centers. The company's products range from individual devices to full rack-scale solutions. The company sources its chips, memory, interconnects, and other hardware from suppliers such as: Intel and Amespecially closely related NVIDIA.
Supermicro differentiates itself through modular product development and in-house engineering, creating server building blocks that can be quickly populated with cutting-edge chips and hardware, and doing the majority of the design and manufacturing in-house. This quality allows Supermicro to bring new products to market faster than competitors; in fact, management expects to be the first to market with a computing platform featuring the latest Nvidia Blackwell graphics processing units (GPUs).
Another benefit of modular product development is that server building blocks can be assembled in countless combinations, which is why Supermicro generally offers a wider range of server and storage products than its peers. In turn, the company gives its customers more flexibility when designing custom computing solutions.
Supermicro is by no means a leader in servers. Dell Technologies That title remains with the company, but it took an early lead in the artificial intelligence (AI) server market and is rapidly gaining market share: KeyBanc analysts predict the company will account for 23% of AI server sales by the end of 2024, up from 10% at the start of the year.
Supermicro reported strong financial results for its fiscal third quarter 2024 (ended March 31). Revenue grew 200% to $3.8 billion and non-GAAP (generally accepted accounting principles) net income increased 308% to $6.65 per diluted share, driven by particularly strong demand for its GPU-accelerated AI platforms. Management also raised its full-year guidance, now expecting revenue to grow 104% to 110% at the midpoint.
Going forward, Wall Street expects Supermicro to grow its earnings per share at 47% annually over the next three to five years. Dividing this number by the current price-to-earnings multiple of 40.5x non-GAAP earnings gives us a very reasonable price-to-earnings growth (PEG) ratio of 0.9. At this price, I believe Supermicro has enough going for it to outperform its peers. S&P 500 Over the next three to five years.
Intuit: An AI-powered platform for professionals
Intuit is the market leader in U.S. tax preparation (TurboTax) and accounting software (QuickBooks). It also owns personal finance platform Credit Karma and marketing platform Mailchimp. Five years ago, Intuit began to redefine itself as an artificial intelligence-driven specialty platform, focusing on expanding the small business ecosystem with related services like payroll and payment processing.
Since then, Intuit has released live versions of TurboTax and QuickBooks that allow users to interact with tax and bookkeeping experts. The company has also introduced a generative AI assistant (Intuit Assist) that answers tax questions and provides recommendations in TurboTax, displays financial information in QuickBooks, and helps small businesses optimize their marketing campaigns in Mailchimp. When appropriate, Intuit Assist directs users to assisted, full-service tax preparation and bookkeeping solutions.
Intuit had a strong fiscal third quarter (ended April 30), beating expectations for both sales and profits. Revenue rose 12% to $6.7 billion, accelerating from a 7% increase a year ago, driven by particularly strong numbers from its small business and self-employed product category, which includes Mailchimp, QuickBooks and related services. Meanwhile, non-GAAP net income rose 11% to $9.88 per diluted share.
Management also raised its full-year outlook, with revenue now expected to grow 13% from 11%-12%, reflecting a more confident outlook across all product categories, especially in the small business and self-employed segments, and non-GAAP earnings per share now expected to grow 17% to 12%-14%.
Looking forward, Wall Street expects Intuit to grow its earnings per share at 17% annually over the next three to five years, which makes its current valuation of 34.5x non-GAAP earnings look reasonable. Additionally, the stock is currently trading at 32.1x free cash flow, a discount to its three-year average of 37.3x free cash flow.
While Intuit has slightly underperformed the S&P 500 over the past three years, I think the company's stock has the potential to outperform its current valuation over the next three to five years.
Should I invest $1,000 in Super Micro Computer right now?
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Trevor Jennewine invests in Nvidia. The Motley Fool invests in and recommends Advanced Micro Devices, Intuit, and Nvidia. The Motley Fool recommends Intel and recommends buying January 2025 $45 calls on Intel and selling August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
A possible stock split in 2024: 2 artificial intelligence (AI) stocks that are up 2,220% and 10,740% in 15 years are worth buying now was originally published by The Motley Fool.
