Shares of enterprise AI solutions innovator Penguin Solutions Inc (NASDAQ:PENG) have shed almost 20% in the past six months.

Several fundamental aspects make the company "an opportunity for long-term capital appreciation," according to JMP Securities.

Analyst Rustam Kanga initiated coverage with a Market Outperform rating and price target of $23.

The Penguin Solutions Thesis: After a strategic business transformation, Penguin Solutionshas transitioned to an operating company focused on enterprise AI solutions, Kanga said in the initiation note.

Check out other analyst stock ratings.

AI investment wave represents an opportunity for Penguin Solutions to "unlock ROI for clients investing in Graphics Processing Units (GPUs) by addressing critical challenges, such as compute bottlenecks, insufficient memory bandwidth, and GPU failure diagnosis," the analyst wrote.

The company's expertise in hardware, software, and services could support margin expansion going ahead, Kanga stated. He further expressed optimism around Penguin Solutions' go-to-market strategy that is focused on "underserved mid-sized enterprise customers that lack extensive data center expertise."

While Penguin Solutions has attracted a strategic investment from South Korean conglomerate, SK Telecom, it has a "strong management team of seasoned operators with a wealth of experience in the computer hardware, data center, and semiconductor industries," the analyst said.

PENG Price Action: Shares of Penguin Solutions had risen by 2.13% to $16.77 at the time of publication on Monday.

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