Goldman has a new AI play where it sees nearly 40% upside

Penguin Solutions could be a breakout player in the expanding artificial intelligence boom, according to Goldman Sachs. The Wall Street investment bank on Friday initiated coverage of the enterprise AI company, which changed its name from SMART Global Holdings last month , with a buy rating and a $21 per share price target. Goldman’s forecast implies roughly 40% upside from Thursday’s $15.05 close. Penguin shares had pulled back more than 20% in 2024 through Thursday, but are about 5.5% higher in early trading Friday. PENG YTD mountain Penguin Solutions shares in 2024. Penguin designs and manufactures enterprise solutions for markets including computing, memory and light-emitting diode ( LED) lighting. Its advance computing segment has exposure to AI and machine learning, as does its memory sector. “PENG is well positioned to address the growing enterprise AI compute opportunity through its Penguin Computing integrated solution, where the company has 25 years of experience designing, building, deploying and managing high-performance computing projects,” Goldman analyst Michael Ng said. While Penguin’s LED and memory businesses are more cyclical and thus face some drawbacks, Ng said the potential growth runway thanks to generative AI can more than make up for any decline in revenue. “We are encouraged by PENG’s exposure to enterprise AI demand, which should help drive PENG revenue to grow at a 13% 5-yr CAGR (F2024-29) and expand operating margins, driven by growth in its compute business and a recovery in the more cyclical memory and LED markets,” Ng added.