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On Monday, B.Riley sustained its Buy rating and $18.00 price target for Extreme Networks (NASDAQ:EXTR). Following a series of Non-Deal Roadshow (NDR) meetings last Thursday with CEO Ed Meyercord, the firm highlighted several positive developments for the company. The discussions revealed an improvement in demand as channel inventories reach normal levels and continued progress in the company's shift towards higher-margin, subscription-based recurring revenue.
The company's transformation efforts are noted to be advancing well, with a focus on increasing its share of the market. Extreme Networks is recognized for its unique cloud and artificial intelligence features, which are anticipated to support the company's robust growth in recurring revenue. This growth is expected to be a driving force for the expansion of the company's valuation multiples.
Management at Extreme Networks has set a goal of achieving a quarterly run-rate of $300 million by the calendar year 2025. This target is supported by an expanding sales funnel and the acquisition of new business logos. These factors contribute to the firm's confidence in the company's future performance and its decision to reaffirm the Buy rating.
The company's strategic shift towards a business model that prioritizes recurring revenue from subscriptions is expected to enhance its profit margins over time. This transition is part of a broader transformation that Extreme Networks is undergoing to better position itself in the competitive market.
The outlook for Extreme Networks is positive, with expectations of continued growth and market share gains. The affirmation of the Buy rating and price target reflects the company's potential for sustained revenue expansion and improved financial performance in the coming years.
In other recent news, Extreme Networks, Inc. reported its financial outcomes for the fourth quarter of fiscal year 2024, expressing optimism for the fiscal year 2025. Despite an existing excess and obsolete inventory provision, the company plans to overcome supply chain constraints and perpetuate its sequential revenue growth.
The company is investing in next-generation AI for networking and developing universal hardware platforms to enhance its product line and customer value proposition. In terms of revenue, Extreme Networks anticipates figures between $1.110 billion and $1.135 billion for the full fiscal year 2025. The company also projects its revenue for Q1 fiscal year 2025 to be between $255 million and $265 million.
These are part of recent developments that also include a focus on improving gross and operating margins throughout fiscal year 2025. The company's strategic focus on next-generation AI and cloud networking, coupled with robust software subscription growth and universal hardware platforms, positions Extreme Networks favorably for the upcoming fiscal year.
InvestingPro Insights
InvestingPro data provides a comprehensive look at Extreme Networks (NASDAQ:EXTR), revealing a market capitalization of $1.89 billion and a challenging P/E ratio at -21.84. Despite the negative P/E ratio, the company's gross profit margin remains strong at 56.47% for the last twelve months as of Q4 2024. This underlines the company's ability to maintain profitability in its operations, which is crucial as it shifts towards a subscription-based model. Additionally, Extreme Networks has experienced a significant return over the last three months, with a 24.42% increase, showcasing investor confidence in the company's strategic direction.
In alignment with the article's positive outlook, an InvestingPro Tip notes that management has been actively engaging in share buybacks, which can signal confidence in the company's future prospects and potentially enhance shareholder value. Furthermore, analysts predict that the company will be profitable this year, offering a promising forecast that aligns with the firm's confidence in Extreme Networks' transformation and growth trajectory.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/EXTR, providing further insights into the company's performance and market potential.
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