Digi (DGII) Stock Forecast & Price Target

Digi International Inc. has shown robust growth with an annual recurring revenue (ARR) of $152 million, marking a 31% year-over-year increase and a sequential adjustment of approximately 4-5%. The company's IoT Solutions segment experienced a notable 23% year-over-year sales growth, supported by strong performance in its SmartSense offerings and contributions from recent acquisitions. Additionally, the company's fiscal outlook for the first quarter of 2026 indicates anticipated sales between $114 million and $118 million, reflecting an 11.7% year-over-year growth at the midpoint, alongside healthy profitability metrics such as adjusted EBITDA and EPS guidance.

Digi International Inc. faces a negative outlook primarily due to the lower gross margins associated with recent module-oriented acquisitions, which contrast sharply with its historical performance of over 50% margins in out-of-band management. Additionally, certain hardware products nearing the end of their life cycles could adversely impact sales and gross margins, while ongoing supply chain challenges have resulted in increased inventory levels and pressure on near-term free cash flow. Furthermore, the company's dependence on third-party wireless communication networks has contributed to a decline in new connected devices, jeopardizing its competitive position in the market.