On Thursday, Rosenblatt Securities adjusted its outlook on shares of Extreme Networks (NASDAQ:EXTR), increasing the price target to $21.00 from the previous $17.00. The firm maintained a Buy rating on the company's shares, signaling confidence in its future performance.
The analyst at Rosenblatt cited several reasons for the optimistic assessment, including Extreme Networks' product strength and market share gains. The company's competitive edge is attributed to its Cloud Management software, Campus Fabric hardware, AIOps integration, robust Service offerings, and a straightforward licensing model. These factors are seen as key drivers for the company's growth.
Extreme Networks has been actively expanding its distribution channels and product range, which includes the introduction of the Extreme Subscription Private Offering (ESPO). ESPO played a significant role in securing one of the company's largest deals ever in the first quarter of 2025 with a Fortune 100 customer. The analyst emphasized that ESPO is expected to contribute incrementally to the company's revenue without cannibalizing existing product sales.
Looking ahead, Rosenblatt anticipates that Extreme Networks will achieve double-digit growth in the fiscal year 2026. The firm also suggests that operating margins (OMs) of 20% or more could be attainable by the second half of 2026, reflecting a strong financial outlook for the company.
This growth expectation is based on a 20 times multiple of the fiscal year 2026 earnings per share (EPS), which aligns with the trading average for the industry group.
In other recent news, Extreme Networks has reported strong Q1 FY 2025 results, surpassing expectations with a revenue of $269.2 million and earnings per share of $0.17. There has been a 5% sequential increase in revenue, driven by robust product sales and subscription contracts.
Moreover, the company reported a significant 23% year-over-year growth in SaaS Annual Recurring Revenue (ARR), indicating a positive trend for the future.
The company's gross margin improved to 63.7%, and total deferred revenue rose by 10% year-over-year. For Q2, Extreme Networks projects a revenue range from $273 million to $283 million, and for the full fiscal year 2025, the anticipated revenue range is between $1,117 million and $1,137 million.
While facing project delays in EMEA, particularly in Germany and the U.K., due to macroeconomic factors and budget approvals, the company is gaining market share from competitors like Cisco (NASDAQ:CSCO), Juniper, and HPE.
Partnerships with AWS and Microsoft (NASDAQ:MSFT) are also enhancing AI capabilities on the platform. These are the latest developments in the company's ongoing efforts to maintain growth and competitiveness in the market.
InvestingPro Insights
Recent InvestingPro data and tips offer additional context to Rosenblatt Securities' optimistic outlook on Extreme Networks (NASDAQ:EXTR). The company's market capitalization stands at $2.1 billion, reflecting its significant presence in the networking solutions market.
InvestingPro Tips highlight that Extreme Networks has been aggressively buying back shares, which often signals management's confidence in the company's future prospects. This aligns with Rosenblatt's positive view on the company's growth potential. Moreover, net income is expected to grow this year, and analysts predict the company will be profitable, supporting the firm's projection of double-digit growth in fiscal year 2026.
The stock has shown a significant return over the last week and a large price uptick over the last six months, with a 42.14% price total return in the past six months. This recent performance may reflect growing investor confidence in Extreme Networks' strategic initiatives, including the expansion of distribution channels and the introduction of ESPO.
It's worth noting that Extreme Networks operates with a moderate level of debt, which could provide financial flexibility as it pursues growth opportunities. However, investors should be aware that the stock price movements are quite volatile, and the company is trading at a high Price / Book multiple of 83.15.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for Extreme Networks, providing a deeper understanding of the company's financial health and market position.
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