DGII: Confidence Will Grow As Recurring Revenue Approaches $200 Million By 2028

The analyst price target for Digi International has increased from $40.50 to $45.80. This reflects greater confidence from analysts following upbeat meetings about management’s progress toward long-term revenue goals and recent strategic acquisitions.

Analyst Commentary

• Bullish analysts are encouraged by the company's consistent progress toward its long-term goal of reaching $200 million in annual recurring revenue and improved adjusted EBITDA by fiscal 2028.
• Recent management meetings left analysts more confident in Digi International's near-term growth prospects, suggesting effective execution of strategic initiatives.
• The acquisition of a complementary firm positions Digi International to offer a stronger cold chain, logistics, and operational workflow solution. This could potentially enhance its competitive advantage in the market.
• Healthy underlying demand and a growing sales pipeline, although somewhat masked by customers taking longer to make decisions, are seen as positive indicators for sustainable revenue growth.

• Bearish analysts highlight that customer decision processes are experiencing delays. This could impact the timing of revenue recognition and slow near-term execution.
• There are lingering concerns about Digi International’s ability to integrate recent acquisitions seamlessly and extract the anticipated operational synergies.
• Execution risks remain, particularly around achieving ambitious fiscal 2028 targets and handling competitive pressures across key business segments.

What's in the News

• Digi International provided earnings guidance for fiscal 2026, projecting approximately 10% growth in annual recurring revenue and 10-15% growth in revenue. First quarter revenues are expected to be $114 million to $118 million. (Key Developments)
• The company introduced the Digi XBee 3 Global LTE Cat 4 cellular modem, which offers cost-effective, reliable connectivity for high-bandwidth IoT applications and simplifies global certification and integration processes. (Key Developments)
• Digi's industrial controller, the Digi Z45 powered by Digi Axess, received certification for use on T-Mobile's network. This device supports faster data updates and combines PLC and SCADA capabilities within a single platform. (Key Developments)
• A new medical-grade serial server, Digi Connect EZ 4, was launched. It is designed for hospitals and patient care environments, featuring enterprise-grade encryption and medical device safety compliance. (Key Developments)
• Digi announced an upcoming Digi XBee solution for Wi-SUN mesh networks. This aims to simplify IoT deployments for smart city, utility, and industrial applications, and provides enhanced network management and security features. (Key Developments)

Valuation Changes

• Consensus Analyst Price Target has risen from $40.50 to $45.80, reflecting increased optimism among analysts.
• Discount Rate has increased slightly from 8.19% to 8.33%, suggesting a minor adjustment to risk or cost of capital assumptions.
• Revenue Growth projection has decreased from 5.69% to 5.22%, indicating more conservative future growth expectations.
• Net Profit Margin has improved from 14.61% to 15.80%, pointing to expectations of higher profitability moving forward.
• Future P/E (Price-to-Earnings ratio) has edged up from 26.84x to 27.94x, which shows a slightly higher valuation relative to forecasted earnings.