On Wednesday, Rosenblatt made adjustments to its expectations for Penguin Solutions (NASDAQ: PENG) shares, reducing the stock's price target from $35.00 to $27.00. Despite this change, the firm sustained a Buy rating on the shares. The decision follows Penguin Solutions' fourth-quarter fiscal year 2024 performance, which landed at the lower end of the company's guidance range and fell short of both the analyst's and the consensus estimates.
Penguin Solutions experienced some shifts in expected deliveries, postponing them to the first and second quarters of fiscal year 2025. This change in delivery schedules has led the company's management to switch from quarterly to full-year guidance.
For the fiscal year 2025, Penguin Solutions is projecting approximately 15% year-over-year growth, with Intelligent Platform Solutions (IPS) revenue anticipated to increase by 10% to 25%. It is important to note that this forecast does not account for any potential revenue from the company's collaboration with SK Telecom.
Despite the slower-than-anticipated growth, the company reported some positive developments, such as securing new clients. Among these are a significant player in the gaming industry and a pilot program with a leading financial institution.
The analyst expressed disappointment with the growth pace but reaffirmed a positive outlook on Penguin Solutions' AI products, software, and services. The value of these offerings is expected to rise as the use of AI systems expands within the enterprise sector.
In other recent news, Penguin Solutions reported Q4 earnings that fell below analyst expectations, with an adjusted earnings per share of $0.37 as opposed to the projected $0.40. The company's revenue of $311 million also fell short of the consensus estimate of $325 million. For the full fiscal year 2024, Penguin Solutions posted a revenue of $1.17 billion, a decrease from $1.44 billion in fiscal 2023.
The company's non-GAAP EPS for the year was $1.25, a significant drop from $2.52 in the previous year. Looking ahead, Penguin Solutions forecasts a fiscal 2025 EPS of $1.50-$1.90, falling below the analysts' expectation of $1.92. The company also projects a fiscal 2025 revenue of $260-290 million, indicating a potential 15% YoY growth plus or minus 5%.
In response to these developments, Needham maintained a Buy rating on Penguin Solutions but reduced the price target to $25 from the previous $35. The adjustment follows the company's quarterly earnings miss and a forecast for fiscal year 2025 that did not meet analyst expectations. Despite these adjustments, Needham still sees a favorable risk-reward balance for investors.
InvestingPro Insights
To complement the analysis of Penguin Solutions (NASDAQ: PENG), recent data from InvestingPro offers additional context. Despite the reduced price target from Rosenblatt, InvestingPro Tips suggest some positive aspects for the company. One tip indicates that net income is expected to grow this year, which aligns with the company's projected 15% year-over-year growth for fiscal year 2025. Moreover, InvestingPro notes that three analysts have revised their earnings upwards for the upcoming period, potentially reflecting confidence in the company's future performance despite the recent delivery postponements.
However, it is worth noting that InvestingPro also points out that the stock price movements are quite volatile, which investors should consider given the recent adjustments in expectations. This volatility may be reflected in the fact that the price has fallen significantly over the last three months, as another InvestingPro Tip indicates.
For a more comprehensive analysis, InvestingPro offers 11 additional tips for Penguin Solutions, providing investors with a broader perspective on the company's financial health and market position.
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