Extreme Networks Stock Sinks Despite Solid Results
Extreme Networks stock fell today despite reporting solid results, as the company’s guidance for the next quarter was below analysts’ expectations.
Extreme Networks stock fell today despite reporting solid results, as the company’s guidance for the next quarter was below analysts’ expectations.
Extreme Networks Stock Sinks Despite Solid Results
Extreme Networks, Inc. (EXTR) reported its financial results for the first quarter of fiscal year 2023, which ended on September 30, 2022. The company’s revenue increased by 11% year-over-year to $276.1 million, beating analysts’ estimates of $273.3 million. However, its adjusted earnings per diluted share of $0.34 per share fell short of analysts’ consensus estimate of $0.37 per share.
Extreme Networks’ first-quarter sales growth was driven by strong demand for its cloud-based networking solutions. The company’s revenue from its cloud business grew by 27% year-over-year to $106.7 million. This growth was driven by increased adoption of Extreme’s cloud-based networking solutions by enterprises and service providers.
Despite the solid first-quarter results, Extreme Networks’ stock fell sharply on Wednesday. The company’s shares closed down 10.5% at $10.70 per share. The decline in Extreme’s stock price was likely due to the company’s weaker guidance for the second quarter.
Extreme Networks’ guidance for the second quarter was below analysts’ consensus estimates. The company expects to report revenue in the range of $270 million to $275 million, below analysts’ consensus estimate of $277.7 million. Extreme Networks also expects to report adjusted earnings per diluted share in the range of $0.32 to $0.34 per share, below analysts’ consensus estimate of $0.36 per share.
The weaker guidance from Extreme Networks was likely due to the ongoing macroeconomic uncertainties and the shift in customer buying patterns. The company’s CEO, Kevin Rhode, said that the “shifting sands” in the macroeconomic environment led to slower sales growth than previously expected. However, Rhode also said that the company expects wider profit margins to lift bottom-line earnings through higher next fiscal year despite softer sales.
Despite the weaker guidance, Extreme Networks’ stock could still be a bargain for long-term investors. The company’s forward earnings multiple is just 11.5 times, which is well below the industry average of 18.5 times. This suggests that Extreme Networks’ stock could be undervalued and could offer investors a good opportunity to buy at a discount.