Penguin Delivers Big Quarter, Yet JPMorgan Sees Momentum Fading In Second Half

Shares of Penguin Solutions Inc PENG traded lower last week, despite the company posting better-than-expected results for its fiscal second quarter on Wednesday.

While the company delivered a strong earnings beat, driven by outperformance in both revenues and margins, its full-year guidance reflects a moderation in growth, according to JPMorgan.

The Penguin Solutions Analyst: Analyst Samik Chatterjee maintained a Neutral rating, while reducing the price target from $20 to $18.

The Penguin Solutions Thesis: The second-quarter beat was driven by more than 40% year-on-year growth in Advanced Computing, Chatterjee said in the note.

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Penguin Solutions executed on new wins and highlighted recent enhancements to its Advanced Computing offering, he added.

However, management raised their revenue guidance for fiscal 2025 to reflect 17% growth at the midpoint, versus 15% in their prior projection, which mostly reflects the better-than-expected performance in the first two quarters and implies the momentum does not continue in the second half, the analyst stated.

"Revenues for Advanced Computing are expected to moderate into 2H on cycling past large deals…margins in 2H are expected to stay largely in the same range as in 1H, with headwinds from a higher mix of low margin Integrated Memory revenues, offset by tailwinds relative to lower mix of hardware within Advanced Computing," he further wrote.

The company kept its guidance conservative likely due to the challenging macro backdrop, Chatterjee said.

PENG Price Action: Shares of Penguin Solutions had risen by 0.4% to $15.26 at the time of publication on Monday.

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