Barclays analyst Tom O'Malley downgraded Penguin Solutions (NASDAQ: PENG) from Overweight to Equalweight with a price target of $27.00 (from $23.00).

The analyst comments: "Numbers move higher post-earnings as PENG revenue benefits from passing through some of the higher memory prices to customers. Meanwhile, the Advanced Computing business (the highest quality exposure) is taking much longer to ramp as AI spend has shifted dollars to the Cloud from traditional Enterprise. The mix shift moves GMs moderately lower over the next two years as 1) Memory becomes a bigger part of the mix and 2) The company can’t keep up with the rising input costs. The company is talking about "new logos" in the Advanced Computing business, but our view is that in the immediate future they are not structurally significant like the RSC projects that initially drove the business. LED has never played out like management initially expected and we expect little growth. We step to the side until we get a more tangible catalyst like the sale of LED business or a synergistic acquisition in Advanced Compute."

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Shares of Penguin Solutions closed at $27.92 yesterday.