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The meteoric rise of technology stocks as Nvidia has made many investors incredibly rich. These are examples of companies whose values have soared because they make AI-enabled products, but if you missed them, this sector is full of other potential big winners. One of them is Penguin Solutions, which is coming off a disappointing third quarter of 2024. So why are so many analysts optimistic about this?
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One of the most pressing questions facing the tech industry is how to expand and maximize the capabilities of AI. This is why data center REITs and utility stocks are so popular. AI consumes data and energy at geometric rates. However, it also depends on memory and storage. Penguin Solutions (Nasdaq: PENG) offers a comprehensive range of products and services that help data centers and technology companies meet the memory-intensive needs of AI.
A partial list of Penguin products includes solid-state servers, LED applications and tailor-made solutions for data centers. Penguin was established in 1988 as SMART Global Holdings. In the 36 years since its founding, Penguin has become a trusted service provider across many industries, including:
· Telecommunications
· Health care
· Energy sector
· Government and education
Trend: During stock market downturns, investors realize that unlike stocks, these High-yield real estate bonds that pay between 7.5% and 9% are protected by resilient assets, which protect against losses.
Despite this strong customer base, Penguin shares are down about 10% this year and the company just released a less than stellar fourth-quarter 2024 earnings report. The company’s earnings per share (EPS) of $0.37 exceeded the $0.35 for Q3 2023, but fell short of the $0.40 EPS forecast by analysts. Net sales of $1.2 billion were also lower than 2023’s $1.4 billion. This led to a sell-off in late October and Penguin is now trading at $17.29.
This is a relatively small investment for a 30+ year old company that provides AI and technology solutions to clients across multiple industries. Analysts at Goldman, they agree and recently gave Penguin a “buy” rating. Goldman believes that Penguin’s range of products and services, along with its low stock price, make it an undervalued stock. Their forecast for Penguin stock is $21, but Stifel analysts think Penguin stock can hit $27.