The ascent of chip maker Nvidia (NASDAQ: NVDA) in the tech investment realm has been nothing short of spectacular, with a price surge of around 238% in the last year. Nvidia has ridden the wave of increased interest in AI, particularly with the impact of OpenAI’s ChatGPT and the growing AI investments by various companies. However, amidst Nvidia’s glory, two other large-cap stocks have outperformed the chip giant: Super Micro Computer (NASDAQ: SMCI) and Carvana (NYSE: CVNA). Let’s delve into their impressive performances and what lies ahead for potential investors in these hidden gems.
Super Micro Computer: Exquisite Elevation of 445%
Super Micro Computer has soared with a gigantic 445% surge in the past year, leaving Nvidia’s returns in the rearview mirror. Like Nvidia, Super Micro Computer has become a sought-after AI investment, with the increasing demand for servers and enhanced computing power fuelling optimism about the company’s future growth prospects.
The meteoric rise of Super Micro is underscored by its remarkable financials – boasting sales of nearly $3.9 billion in the initial three months of this year, a substantial leap from the $1.3 billion reported in the preceding year. The company’s revenue is predominantly derived from its server and storage systems segment, with subsystems and accessories contributing a modest $152 million last quarter. Profitability has also witnessed an upturn, with Super Micro reporting $402 million in profits during the period, over a fourfold increase from the $86 million earnings in the corresponding period of the prior year.
Super Micro’s stellar performance is supplemented by its comparably modest valuation, standing at a market cap of $53 billion despite its staggering returns. The stock trades at a forward price-to-earnings (P/E) ratio of 25, representing a reasonable valuation considering its substantial gains. In contrast, Nvidia trades at a higher forward P/E of 38.
With robust growth narratives, promising growth prospects, and a valuation that aligns well with its long-term growth trajectory, investing in Super Micro Computer could still hold merit for discerning investors.
Carvana: The Thrilling Rally of 876%
Carvana has been the dark horse, catapulting investors with an astonishing 876% surge over the past year, surpassing even Super Micro Computer in returns. However, this monumental rise has not come without its share of risks, as volatility remains a significant factor in Carvana’s trajectory.
Not long ago, Carvana was the pariah of stocks, experiencing a jaw-dropping 98% drop in 2022. The online used-car retailer faced challenges such as cash burn, rising interest rates, and dwindling demand for used cars.
Despite the lingering skepticism, Carvana has defied odds and showcased an improved performance, evident in its surprising profit of $49 million for the period ending March 31, a stark contrast to the $286 million loss incurred a year prior. Moreover, a 17% year-over-year increase in sales to $3.1 billion underscores the company’s resurgence. Carvana’s operating cash flow has also seen a positive turn, generating $101 million in cash from day-to-day activities last quarter, a stark contrast to the $66 million burn-through a year ago.
While Carvana’s recent strides are commendable, uncertainties remain, particularly regarding sustained profitability, with a profit margin of just 1.6% in the last quarter. Prudent investors may opt to observe the company’s trajectory over several quarters to ascertain if Carvana is a prudent investment amidst its volatility and heightened short interest.
Super Micro Computer: A Hidden Powerhouse?
Considering an investment in Super Micro Computer? Contemplate this:
The Motley Fool Stock Advisor analysts have identified ten potential gems for investors to consider for future gains, with Super Micro Computer not currently making the cut. The historical success of the Stock Advisor service, which has outperformed the S&P 500 by over fourfold since 2002*, underscores the potential of these selected stocks.
Ponder this: when Nvidia was endorsed on April 15, 2005, a $1,000 investment at that juncture would have burgeoned into a staggering $635,982*!
*Stock Advisor returns as of May 13, 2024