Group 1 - Analyst Tommy Moll from Stephens raised the price target on Digi International (DGII) to $55 from $50, maintaining an Overweight rating on the shares [1] - The firm is adjusting its assumed Annual Recurring Revenue (ARR) multiple to be "slightly higher" due to strong recent execution in ARR [1] - Digi International is approaching another year of estimated double-digit ARR growth, indicating positive future performance [1]

For those looking to find strong Computer and Technology stocks, it is prudent to search for companies in the group that are outperforming their peers. Digi International (DGII) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? A quick glance at the company's year-to-date performance in comparison to the rest of the Computer and Technology sector should help us answer this question.Digi International is one of 601 compan ...

Riverwater Partners, an investment management company, released its “Small Cap Strategy” Q3 2025 investor letter. A copy of the letter can be downloaded here. The Small Cap Core Strategy reported solid results for the quarter but did not keep pace with the sharp rally, thus lagging the benchmark. The market’s preference for lower-quality companies persisted in the quarter and contributed significantly to the benchmark’s outperformance. On the other hand, the strategy remains focused on higher-quality compa ...

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Digi International (DGII) - Digi International currently holds a Momentum Style Score of B, indicating a favorable momentum characteristic [2] - The company has a Zacks Rank of 2 (Buy), suggesting strong potential for outperformance in the market [3] Performance Metrics - Over the past week, DGII shares have increased by 7.79%, while the Zacks Computer - Networking industry remained flat [5] - In a longer timeframe, DGII's monthly price change is 30.66%, significantly outperforming the industry's 2.13% [5] - Over the last quarter, DGII shares rose by 29.48%, and over the past year, they increased by 38.72%, compared to the S&P 500's gains of 5.71% and 15.31%, respectively [6] Trading Volume - The average 20-day trading volume for DGII is 294,800 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, three earnings estimates for DGII have been revised upwards, while none have been lowered, leading to an increase in the consensus estimate from $2.20 to $2.38 [9] - For the next fiscal year, one estimate has moved upwards with no downward revisions [9] Conclusion - Given the positive performance metrics and earnings outlook, DGII is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [11]

Core Insights - Digi International has partnered with Simetric to enhance its IoT connectivity offerings through validated eSIM orchestration and lifecycle control, allowing for improved management of distributed IoT environments [1][3] Industry Context - As enterprises expand globally, they encounter increased complexity in managing devices, data, and connectivity across various carriers, with eSIM technology playing a crucial role in enabling carrier choice and remote provisioning [2] - The global eSIM market is projected to grow significantly, with Juniper Research estimating 3.4 billion IoT eSIM connections by 2025 and 40 billion by 2034, indicating a strong demand for validated orchestration platforms [5] Company Developments - Digi's collaboration with Simetric aims to simplify eSIM and distributed device management, utilizing Simetric's orchestration platform to normalize data and workflows, ensuring a standardized eSIM experience for customers [3][4] - Digi is among the first IoT solution providers to align its commercial deployments with GSMA .32 standards, setting a benchmark for interoperability and lifecycle governance in distributed networking [4] - The partnership is part of Digi's strategy leading into Mobile World Congress 2026, where the company will showcase innovations in validated eSIM management [6] Strategic Positioning - The CEO of Simetric highlighted that Digi is setting a precedent for how enterprises will manage global connectivity in the future by aligning with GSMA .32 validation and distributed orchestration [7]

Supply Chain and Operational Risks - The company experienced significant supply chain disruptions, leading to elevated inventory levels compared to historical norms[52] - The company’s operations may be adversely affected by potential new international tariffs, impacting supply chains and product competitiveness[65] - The company is reliant on third-party manufacturers in countries such as Mexico, Thailand, Taiwan, and China, which may face disruptions affecting timely product delivery[99] - The company is exposed to risks from natural disasters and geopolitical events that could disrupt supply chains and negatively impact revenue[105] - The lengthy sales cycle for certain products complicates revenue forecasting and can materially affect operating results if orders are delayed[53] Customer and Revenue Concentration Risks - A distributor customer represented 13% of consolidated revenue for the twelve months ended September 30, 2025, indicating customer concentration risk[58] - The company acquired Ventus in fiscal 2022, which has historically concentrated its business on fewer than twenty customers, posing risks to revenue stability[56] - The company relies on third-party distributors for a substantial portion of revenue, increasing vulnerability to their sales performance[64] - The company’s revenue may fluctuate significantly based on large project-based purchases, which are not consistently repeated[90] Financial Performance and Metrics - Consolidated revenue for fiscal 2025 was $430 million, representing a 1% increase from $424 million in fiscal 2024[148] - Net income rose by 81% to $41 million, with net income per diluted share increasing by 77% to $1.08[148] - Annual Recurring Revenue (ARR) reached over $152 million, a 31% increase from $116 million in fiscal 2024[148] - Operating income for fiscal 2025 was $56 million, a 17% increase from $48 million in fiscal 2024, with an operating margin of 13.1%[150] - Operating expenses increased by 6.2% to $214 million, primarily due to a rise in labor and non-labor expenses[156] Research and Development - The company intends to allocate significant resources to research and development, with expenses projected at 14.8%, 14.2%, and 13.2% of revenue for fiscal years 2025, 2024, and 2023 respectively[101] - The company is investing in new product development to address declining demand in mature markets, but long-term revenue generation remains uncertain[92] - The company’s research and development efforts may not yield successful products, potentially harming revenue and business prospects[101] Cybersecurity and Regulatory Risks - Cybersecurity risks are present, with potential vulnerabilities in products and reliance on cloud-based technologies increasing operational risks[70] - The company faces increasing costs and potential revenue loss due to cybersecurity risks, including legal liabilities and regulatory compliance challenges[74] - The company may face challenges in complying with evolving regulatory requirements related to foreign operations, which could adversely affect revenue[80] - The company has established processes for managing cybersecurity risks and has implemented ongoing training and security measures[125] Market and Competitive Landscape - The company’s ability to compete effectively is threatened by established competitors with greater resources and technological advantages[81] - The company’s future growth is dependent on successfully navigating economic downturns and credit conditions that may impact customer spending[89] - The company is considering incorporating artificial intelligence into its product offerings, which may present regulatory and competitive challenges[76] - The company’s reliance on new product introductions and technological advancements makes it susceptible to market fluctuations and potential loss of market share[83] Acquisitions and Financial Agreements - The company completed the acquisition of Jolt in August 2025, which significantly contributed to the increase in ARR[145] - The company has entered into a credit agreement providing a $250 million senior secured revolving credit facility, with an additional borrowing capacity of up to $95 million or 100% of trailing twelve-month adjusted EBITDA[107] - A total of $215 million was borrowed under the new credit facility to repay obligations under the previous credit agreement, which consisted of a $350 million term loan and a $35 million revolving credit facility[108] - The company completed the acquisition of Jolt Software, Inc. for $148.5 million on August 18, 2025, allocating $99 million to a customer relationship intangible asset[216] Stockholder and Market Information - The company’s common stock is listed on the Nasdaq Global Select Market under the symbol DGII, with 94 stockholders of record as of November 14, 2025[133] - The stock price of the company fluctuated between $23.13 and $38.11 per share during fiscal 2025, closing at $38.38 on November 14, 2025[121] - The company’s stockholders' return from September 30, 2019, to September 30, 2025, showed a cumulative return of $233.27 compared to the Nasdaq U.S. Benchmark TR Index's return of $209.01[138] Goodwill and Impairment - The company reported a potential impairment of goodwill if stock prices decline over a sustained period or if acquired businesses do not meet anticipated results[122] - As of June 30, 2025, the company reported a total goodwill of $175.5 million for the IoT Products & Services reporting unit and $167.6 million for the IoT Solutions reporting unit, with no impairment recorded[196] - Goodwill impairment tests conducted on June 30 for the years 2023, 2024, and 2025 indicated no impairment[249] - No additional goodwill impairment assessment was deemed necessary as of September 30, 2025[249]

Industry Overview - The Zacks Computer - Networking industry is poised for growth driven by advancements in cloud computing, network security, big data, and next-gen connectivity, particularly with the rapid adoption of AI technology [1][2] - The proliferation of AI workloads and hyperscale data centers is leading to increased investments in high-speed interconnects, optical networking, and Ethernet switches [1] - The deployment of 5G technology is enhancing the Internet of Things (IoT), Advanced Driver Assistance Systems, AR/VR devices, and 5G smartphones, thereby increasing demand for robust networking infrastructure [1] Trends Influencing the Industry - The explosion of AI workloads necessitates significant upgrades in observability infrastructure, increasing the demand for innovative networking products [2] - The rapid deployment of 5G technology is expected to boost growth prospects, with substantial investments required to upgrade core fiber backhaul networks [5] - The upcoming Wi-Fi 7 upgrade cycle is anticipated to drive momentum in the industry, addressing Wi-Fi spectrum shortages and supporting a higher number of connected devices [6] Company Performance - NetScout Systems reported a 15% year-over-year revenue increase to $219 million in Q2 of fiscal 2026, driven by demand across enterprise and service provider markets [20] - Digi International achieved a 9% year-over-year revenue growth of $114 million in fiscal 2025, with a 31% surge in Annual Recurring Revenue (ARR) to $152 million [28] - Lantronix reported a 3% year-over-year revenue increase to $29.8 million in Q1 of fiscal 2026, with significant growth in its unmanned aerial systems segment [34] Stock Market Performance - The Zacks Computer - Networking industry has outperformed the S&P 500 Composite and the broader Zacks Computer and Technology sector, gaining 33.4% over the past year compared to the sector's 23.9% and the S&P 500's 12.9% [11] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 22.45X, slightly below the S&P 500's 22.78X and the sector's 27.8X [14] Future Outlook - The Zacks Industry Rank for the Computer - Networking industry is 38, placing it in the top 16% of over 243 Zacks industries, indicating bright near-term prospects [9] - Companies in the industry are focusing on innovation in networking technologies, including network virtualization and Software-Defined Networking, to meet the growing demand for secure infrastructure [4]

Group 1 - Robert F. Abbott has been managing family investments since 1995 and incorporated options trading in 2010, focusing on covered calls and collars with long stocks [1] - Abbott is a freelance writer with a project aimed at providing information for new and intermediate-level mutual fund investors [1] - He holds a Bachelor of Arts and a Master of Business Administration (MBA) degree [1]

Core Insights - Robert F. Abbott has been managing family investments since 1995 and incorporated options trading in 2010, focusing on covered calls and collars with long stocks [1] Group 1 - Robert F. Abbott is a freelance writer and operates a website aimed at new and intermediate mutual fund investors [1] - He holds a Bachelor of Arts and a Master of Business Administration (MBA) degree [1] - Abbott resides in Airdrie, Alberta, Canada [1]

Core Insights - Digi International Inc. reported better-than-expected fourth-quarter financial results, with earnings of 56 cents per share, surpassing the analyst consensus estimate of 51 cents per share, and quarterly sales of $114.338 million, exceeding the estimate of $110.248 million [1] - The company anticipates first-quarter adjusted earnings between 53 cents and 58 cents per share, compared to market estimates of 52 cents per share, and expects sales in the range of $114 million to $118 million, against estimates of $114.6 million [2] - The CEO highlighted the company's commitment to delivering reliable IoT solutions amid market challenges, with annual recurring revenue (ARR) now representing approximately 35% of total revenue [3] Financial Performance - Fourth-quarter earnings: 56 cents per share, beating estimates of 51 cents [1] - Quarterly sales: $114.338 million, exceeding estimates of $110.248 million [1] - First-quarter adjusted earnings forecast: 53 to 58 cents per share, against estimates of 52 cents [2] - First-quarter sales forecast: $114 million to $118 million, compared to estimates of $114.6 million [2] Strategic Developments - The acquisition of Jolt Software in the IoT Solutions Segment is generating favorable market acceptance [3] - The company celebrated its 40th anniversary and aims to leverage its culture of resilience and adaptability for future growth [3] Analyst Ratings - Craig-Hallum analyst upgraded Digi Intl from Hold to Buy, raising the price target from $30 to $45 [6] - Piper Sandler maintained a Neutral rating, increasing the price target from $36 to $41 [6] - Roth Capital maintained a Buy rating, raising the price target from $45 to $50 [6]