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The meteoric rise of tech stocks like Nvidia has made many investors incredibly wealthy. These are examples of companies whose value has soared because they make products that support AI, but even if you miss them, there are other companies in this space that could be big winners. There are many. One is Penguin Solutions, which has disappointing results for the third quarter of 2024. So why are so many analysts bullish on this?
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One of the most pressing issues facing the technology industry is how to scale and maximize the capabilities of AI. That’s why data center REITs and utility stocks are attracting so much attention. AI consumes data and power at a geometric rate. However, it also depends on memory and storage. Penguin Solutions (Nasdaq: PENG) offers a wide range of products and services that help data centers and technology companies meet the demanding memory requirements of AI.
A partial list of Penguin’s products includes solid-state servers, LED applications, and build-to-suit solutions for data centers. Penguin was originally founded in 1988 under the name SMART Global Holdings. In the 36 years since our founding, Penguin has become a trusted service provider in multiple areas including:
· Telecommunications
· health care
・Energy field
· Government and education
Trend: During market downturns, investors are learning that unlike stocks, these high-yield real estate bonds, yielding 7.5% to 9%, are protected by resilient assets and cushion losses .
Despite its strong customer base, Penguin stock is down about 10% this year, and the company just released a less-than-stellar 2024 fourth-quarter earnings report. The company’s earnings per share (EPS) was $0.37, higher than the $0.35 reported in the third quarter of 2023, but falling short of analyst estimates of $0.40. Net sales were also $1.2 billion, lower than the $1.4 billion in 2023. This led to a decline in late October, with Penguins currently trading at $17.29.
This is a relatively low endorsement for a 30+ year old company that provides AI and technology solutions to customers in multiple sectors. Goldman analysts agree, recently giving Penguin a buy rating. Goldman believes that the combination of Penguin’s product and service offerings, as well as its low stock price, means the stock is undervalued. Their forecast for Penguin stock is $21, but Stifel analysts believe Penguin stock could reach $27.
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