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Investing.com - Loop Capital raised its price target on Penguin Solutions (NASDAQ:PENG) to $35.00 from $30.00 on Monday, while maintaining a Buy rating following the company’s May quarter earnings report released on July 8. Currently trading at $24.10 with a market cap of $1.26 billion, InvestingPro analysis suggests the stock is undervalued based on its Fair Value calculation.
The company reported revenue slightly below Street expectations but delivered stronger-than-anticipated earnings per share. With seven analysts recently revising their earnings estimates upward according to InvestingPro data, Penguin Solutions is seeing early signs of commercial AI adoption, securing five new customers this quarter, including one related to SK Group, following three customer acquisitions in the February quarter.
Penguin Solutions booked a hardware order from SK Group worth approximately $35 million and sees potential for additional business on the data center side. The company is also working with a small Neocloud customer expected to generate revenue in the August quarter, though the deal is valued at only a few million dollars.
The company has maintained its fiscal year 2025 revenue growth outlook at 17% while raising its diluted EPS outlook to $1.80 at the midpoint. With a strong current ratio of 2.62x and moderate debt levels, the company appears well-positioned to pursue growth opportunities. Loop Capital highlighted that Penguin Solutions has been brought into a large sovereign AI opportunity in the Middle East, though this initiative remains in very early stages.
The SK Group relationship opens doors for Penguin Solutions to secure deals in South Korea and potentially the United States, while the company’s partnership with Dell (NYSE:DELL) is expected to impact financial results in fiscal year 2026. The stock has shown impressive momentum with a 15% return over the past week and 23% over six months. For deeper insights into Penguin Solutions’ financial health and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which includes 15 additional ProTips and extensive financial metrics.
In other recent news, Penguin Solutions reported its fiscal third-quarter 2025 results, highlighting an 8% year-over-year revenue growth to $324.3 million, though this fell short of the consensus estimate of $328.8 million. The company’s Integrated Memory segment performed strongly, generating $130.1 million in revenue, surpassing expectations of $116.5 million. On the earnings front, Penguin Solutions posted non-GAAP earnings per share of $0.47, exceeding the consensus estimate of $0.32. CEO Mark Adams emphasized the company’s growth prospects, particularly in the Advanced Computing segment, despite its revenues coming in below expectations. The company maintained its fiscal year 2025 guidance, projecting 17% year-over-year revenue growth and adjusted EPS of $1.80, which aligns with management’s confidence. Analysts at Citizens JMP reiterated a Market Outperform rating with a $26.00 price target, reflecting optimism about the company’s strategic focus. Additionally, Penguin Solutions strengthened its financial position through a refinancing effort post-third quarter. The company continues to focus on developing its AI software and services capabilities, despite a slight decline in gross margins compared to the previous year.
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