DGII: Expanding Recurring Revenue Pipeline Will Support Healthier Demand And Margin Progress

Analysts modestly increased their price target on Digi International to $45 from $42, citing healthier near term demand, an expanding pipeline, and growing confidence in the company’s path toward its long term recurring revenue and EBITDA goals, despite slightly higher discount rate assumptions.

Analyst Commentary

Bullish analysts are highlighting Digi International's strengthened investment case following recent interactions with management, pointing to a clearer path toward the company’s long term financial targets and a healthier demand backdrop than previously appreciated.

Management discussions have reinforced confidence that Digi can continue to scale its recurring revenue base while expanding margins, supporting a premium valuation relative to historical levels.

Bullish Takeaways

• Bullish analysts raised their price targets into the mid 40 dollar range, reflecting greater conviction in Digi's ability to execute on its growth strategy and achieve higher long term earnings power.
• Improving visibility into the company’s pipeline and “healthy” underlying demand, despite elongated customer decision cycles, is seen as a key catalyst for sustained revenue growth and multiple expansion.
• Progress toward the goal of 200 million dollars in annual recurring revenue and higher adjusted EBITDA by fiscal 2028 supports a more constructive view on operating leverage and long term free cash flow.
• Investor meetings left bullish analysts more confident that near term volatility in order timing is transitory, with the business mix and backlog positioning Digi to outperform as customer spending normalizes.

What's in the News

• Digi International partnered with Simetric to add validated eSIM orchestration and lifecycle control across its connected device portfolio, supporting GSMA .32 standard aligned distributed networking with improved precision, security, and carrier flexibility for global IoT deployments (Key Developments).
• The company launched an SGP.32 compatible eSIM accessory that standardizes SIM management across its devices, positioning Digi as an early leader in GSMA .32 compliant, interoperable eSIM solutions for rapidly growing global IoT connectivity needs (Key Developments).
• Digi issued fiscal 2026 guidance, projecting approximately 10 percent ARR growth and 10 to 15 percent total revenue growth, with first quarter revenue estimated between 114 million dollars and 118 million dollars (Key Developments).
• Digi introduced the Digi XBee 3 Global LTE Cat 4 cellular modem, offering globally certified, higher bandwidth LTE connectivity with GNSS, Bluetooth Low Energy, edge intelligence via Micro Python, and remote management through Digi Remote Manager for demanding industrial IoT applications (Key Developments).
• The Digi Z45 Industrial Controller, powered by Digi Axess, received certification for use on T Mobile's network, enabling faster data updates, tighter operational control, and integrated PLC plus SCADA capabilities for cellular based automation customers (Key Developments).

Valuation Changes

• The fair value estimate remained unchanged at approximately 50.0 dollars per share, suggesting no adjustment to the intrinsic value assessment despite model tweaks.
• The discount rate increased slightly from about 8.19 percent to roughly 8.30 percent, reflecting a modestly higher risk or return expectation embedded in the valuation model.
• Revenue growth assumptions were raised meaningfully from about 6.64 percent to roughly 8.15 percent, indicating stronger expected top-line expansion over the forecast horizon.
• Net profit margin expectations edged down modestly from approximately 15.61 percent to around 15.37 percent, pointing to slightly lower anticipated profitability levels.
• The future P/E multiple decreased from roughly 30.2 times to about 28.9 times, implying a somewhat more conservative valuation multiple applied to projected earnings.