Digi (DGII) Stock Forecast & Price Target

Digi International Inc has demonstrated strong growth metrics, with Annual Recurring Revenue (ARR) reaching $152 million, reflecting a 31% year-over-year increase, and a notable contribution of $32 million from IoT Solutions, which grew 23% year-over-year. The company is also projecting robust sales guidance for the first quarter of FY26 at $114-118 million, indicating an 11.7% year-over-year increase at the midpoint and improved profitability as evidenced by adjusted EBITDA and EPS expectations of $28.5-30.0 million and $0.53-0.57, respectively. Additionally, Digi's gross margins improved significantly to 63.9%, underscoring operational efficiencies and a favorable product mix, contributing to an overall positive outlook for the company's financial performance.

Digi International Inc. faces a negative outlook primarily due to the lower gross margins associated with its recent module-oriented acquisitions, which could impact market share and pricing strategies. Additionally, the company is encountering diminishing sales from certain hardware products nearing the end of their product life cycles, coupled with elevated inventory levels caused by supply chain challenges, leading to lower near-term free cash flow. Furthermore, external pressures such as global tariffs and dependence on third-party wireless communication networks contribute to the overall financial instability, complicating growth forecasts.