Sky's The Limit: Extreme Networks Soars Into Cloud Networking Growth - Benzinga Analyst Says Buy

Extreme Networks Inc EXTR, a leader in cloud networking, is poised for significant growth potential, says Benzinga analyst Gianni Di Poce.

What Happened: Di Poce said in his weekly “Benzinga Pro Insider Report” that despite a steep valuation with a P/E of 52.83, Price-to-Sales at 2.15, and EV to EBITDA at 23.85, he is bullish on the stock, and sees 38% upside potential from current levels.

The analyst noted Extreme’s annual recurring revenue from its software-as-a-service operations increased by 29% year-over-year, driving record revenue and earnings in 2022. The recent integration of network fabric capabilities into its “ExtremeCloud SDWAN” platform allowed for safe connections across various operating systems in a single platform.

Recent service enhancements have also improved user experience and boosted network security via hyper-segmentation, he noted.

The company's completion of Wi-Fi 6 network deployments on five NASCAR racetracks has further solidified its reputation as a leader in cloud networking. More than that, with over 10% of floated shares sold short, EXTR could be a candidate for a modest short squeeze, Di Poce said.

Extreme’s solid free quarterly cash flow of $170.98 million caught the attention of other analysts as well, with Rosenblatt Securities and Needham & Co rating it a Buy.

From a charting perspective, Di Poce said the stock is consolidating within a descending triangle formation. If it clears the upper trendline of the pattern, it could lead to another break higher.

Di Poce said he is bullish on the stock as long as it remains above $17.00, with an upside target of $27.00

EXTR Price action: Shares of Extreme Networks are trading 1.38% higher to $19.11, according to data from Benzinga Pro.