This Underpriced AI Stock Is Trading For Only $20 – Could It Be The Next Nvidia?

The meteoric rise of tech stocks like Nvidia has made many investors incredibly rich. They are examples of companies whose values have skyrocketed because they make products that support AI, but if you missed out on them, this sector is full of other potential big winners. One is Penguin Solutions, which is coming off a disappointing Q3 2024. So, why are so many analysts bullish on it?

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One of the most pressing questions facing the tech industry is how to expand and maximize AI’s capabilities. That's why data center REITs and utility stocks are so hot. AI consumes data and power at geometric rates. However, it also depends on memory and storage. Penguin Solutions (Nasdaq: PENG) provides a full range of products and services that help data centers and tech companies satisfy AI's intense memory requirements.

A partial list of Penguin’s products includes solid-state servers, LED applications and build-to-suit solutions for data centers. Penguin was originally formed in 1988 under the name SMART Global Holdings. In the 36 years since it was founded, Penguin has become a trusted service provider for multiple sectors, including:

·      Telecommunications

·      Health care

·      Energy sector

·      Government and education

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Despite that strong client base, Penguin’s stock has been down about 10% this year and the company just released a less-than-stellar Q4 2024 earnings report. The company's earnings per share (EPS) of $0.37 bested the $0.35 of Q3 2023 but fell short of the $0.40 EPS analysts predicted. Net sales of $1.2 billion were also less than 2023's $1.4 billion. This led to a sell-off in late October and Penguin is now trading at $17.29.

That's a relatively low buy-in for a 30-plus-year-old company that provides AI and tech solutions to clients in multiple sectors. Analysts at Goldman agree and recently gave Penguin a "buy" rating. Goldman believes that Penguin's roster of products and services, plus its low share price, adds up to an undervalued stock. Their forecast for Penguin stock is $21, but Stifel analysts think Penguin shares can hit $27.

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There also seems to be a consensus between Penguin's management and its analysts regarding a revenue rebound in 2025. Penguin management predicts revenue will increase by 15% and analysts expect revenue to match the $1.4 billion of 2023. If Penguin hits those targets, the share price is set for a strong increase. If shares reach the halfway point between the $21 and $27 analysts predict, Penguin investors will have a happy 2025.

That would see Penguin shares trading around $24, a near 35% gain on the current $17.29 share price. It's important to remember that there is no guarantee that Penguin will hit the targets set by analysts. However, it's also possible that Penguin will exceed those expectations and become a big winner in 2025. So, if you're looking for an affordable tech stock and missed out on Nvidia, give Penguin a look.

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