The immediate rise of artificial intelligence (AI) has created a growing demand for data center equipment, and has put company’s like Extreme Networks (NASDAQ:EXTR) in good position to leverage this ongoing need for data center infrastructure. This points to a promising future potential for the company. The stock is up roughly 10% over the past 90 days, and trades at an attractive valuation, presenting a compelling investment proposition for investors interested in a value-oriented tech play in the AI space with long-term growth potential.
Extreme Networks’ SaaS Driving Revenue
Extreme Networks offers cloud-centered networking solutions to frontline enterprise, data center, and service provider customers, primarily by selling wired and wireless network infrastructure equipment and related software.
With an impressive base of over 50,000 customers worldwide, the company utilizes machine learning, artificial intelligence, analytics, and automation to push the boundaries of technology. However, software-as-a-service (SaaS) and support sales currently drive a significant portion of its revenue.
Extreme Networks’ Recent Financial Results
Extreme Networks’ financials tell an overall positive tale, albeit with mixed results. The company closed the third quarter of FY2024 with a revenue of 211.04 million exceeding expectations of $204.63 million. Despite this top-line beat, the company’s yearly performance showed a significant decrease in revenue, down by 36.5% year-over-year. On a brighter note, the Software as a Service (SaaS) Annual Recurring Revenue (ARR) experienced a surge, recording a 38% year-over-year increase to $162.0 million. Yet, earnings per share (EPS) of -$0.19 fell slightly short of the expectations of -$0.18.
The company ended the quarter with a cash balance of $151.0 million, down $70.4 million from Q2 2024 but up $52.0 million from Q3 the prior year. Net debt was $41.5 million, a decrease from the net cash of $26.4 million at the end of Q2 2024 but a slight increase from the net debt of $34.0 million at the end of Q3 in the previous year.
What Is the Price Target for EXTR Stock?
Analysts following the company have mostly been constructive on the stock. For example, Craig-Hallum analyst Christian Schwab, a five-star analyst according to Tipranks ratings, recently upgraded the shares from Hold to Buy with a price target of $14, noting encouraging industry trends and the expectation that a majority of the excess inventory in the market will likely be used up by the end of July, freeing up new purchasing demand.
Extreme Networks is rated a Strong Buy overall, based on the recommendations and price targets set by five analysts over the past three months. The average price target for EXTR stock is $15.10, representing a potential upside of 17.69% from current levels.
While the shares had been trending downward for the past year, the recent uptick has shifted the price momentum in a positive direction, with the shares trading above the 20-day (11.97) and 50-day (11.76) moving averages. The stock sits at the lower end of its 52-week price range of $10.50 – $32.73 and trades at a relative discount, with a P/S ratio of 1.38x compared to the Communication Equipment industry average of 1.82x.
Final Thoughts on EXTR
Extreme Networks presents an enticing investment proposition for value-oriented tech investors. Fueled by the growing demand from the surge in artificial intelligence, the company is well-positioned for long-term growth. The stock trades at an appealing valuation relative to its industry peers, adding to its potentially attractive investment profile.
