The continued remote working trend worldwide is compelling IT companies to fine-tune their networks to make them end-to-end feasible for data accessibility by remote employees. Also, several trends like enterprise network strategy, networking with remote AI support, the growth of intent-based networking (IBN), and other features should further drive the growth of the networking market.
In addition, the increasing technological breakthroughs and product upgrades by manufacturers and software developers are likely to offer significant expansion opportunities for existing players. The global cloud-managed networking market is expected to grow at a CAGR of 21.1% by 2027.
Given this backdrop, networking stocks, Viavi Solutions Inc. (VIAV), Extreme Networks, Inc. (EXTR), AudioCodes Ltd. (AUDC), and Digi International Inc. (DGII), could be great bets now. They have solid growth attributes and are rated ‘Strong Buy’ in our proprietary POWR Ratings system.
Viavi Solutions Inc. (VIAV)
VIAV is a worldwide provider of a broad portfolio of network, communications, and electronics technology leaders with over 350 global channel partners. The company operates through three segments: Network Enablement (NE); Service Enablement (SE); and Optical Security and Performance Products (OSP) segments. Its segments offer testing solutions, embedded systems that yield network services, and optical products for anti-counterfeiting, consumer and industrial, Government, automotive, and other markets.
Last month, VIAV collaborated with the Ericsson Intelligent Automation Platform to bring geological capabilities that can be used by all other rApps in the Ericsson Intelligent Automation Platform / SMO. This collaboration should help VIAV become one of the earliest independent software vendors to contribute its solution to run on the new service management and orchestration (SMO) platform.
VIAV’s net revenue increased 14.8% year-over-year to $326.8 million for the fiscal first quarter ended October 2, 2021. The company’s gross profit grew 15.1% from the year-ago value to $195 million. Its income from operations rose 49.8% from the prior-year quarter to $46.9 million.
Analysts expect VIAV’s revenue for the fiscal year 2022 to be $1.26 billion, representing a 5.4% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 2.4% in fiscal 2021 and 4.7% in fiscal 2022. Its stock price has increased 9% over the past three months.
VIAV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Sentiment and Quality. We’ve also graded VIAV for Momentum, Stability, Value, and Growth. Click here to access all of VIAV’s ratings. VIAV is ranked #4 of 55 stocks in the C-rated Technology – Communication/Networking industry.
Extreme Networks, Inc. (EXTR)
Incorporated in 1996, EXTR is a wireless network infrastructure and equipment provider that markets its products to business, governmental, healthcare, service provider, and educational customers. The company’s products include Extreme Wireless, Extreme Switching, Extreme Control, Extreme Management, Extreme Cloud, Extreme Analytics, and Extreme Security.
This month, EXTR partnered with NetNordic, to establish one of the largest cloud-managed network infrastructures in Borås Stad, Sweden, transforming the municipality into a smart city. This new infrastructure should provide advanced public wi-fi connectivity, streamlined network management, and insightful data.
During the fiscal first quarter ended September 30, 2021, EXTR’s total net revenue increased 13.5% year-over-year to $267.7 million. The company’s net income grew 154.5% from the year-ago value to $28 million. Its EPS rose 133.3% from the prior-year quarter to $0.21.
EXTR’s revenue is expected to increase 11% year-over-year to $1.12 billion in the fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to increase 36.8% in fiscal 2021 and 21.8% in fiscal 2022. Moreover, the stock has gained 50.1% over the past nine months and 83.9% over the past year.
EXTR’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Growth and a B grade for Value and Quality.
In addition to the POWR Rating grades I’ve just highlighted, one can see EXTR’s ratings for Stability, Momentum, and Sentiment here. The stock is ranked #2 in the same industry.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC provides advanced communications software, products, and productivity solutions for the digital workplace. The company’s products include IP phones and meeting room solutions, session border controllers (SBC), media gateways, and other services. AUDC also enables enterprises and service providers to build and operate all IP voice networks in unified communications, contact centers, and hosted business services.
This month, AUDC announced the addition of Microsoft Operator Connect integration and a multi-tier customer portal to its Live Cloud offering. Here, AUDC Live Cloud should support Microsoft’s modern authentication based on the Azure Active Directory and includes multi-tier management for end-to-end network statistics and quality of service monitoring.
AUDC’s total revenues increased 12.1% year-over-year to $63.41 million for the third quarter ended September 30, 2021. The company’s gross profit grew 16.2% from the year-ago value to $44.12 million. Its operating income came in at $9.99 million during the period. Also, the company’s net income rose 18.7% from the prior-year quarter to $8.26 million.
AUDC’s revenue for the fiscal year 2022 is expected to be $279.15 million, representing a 12.5% year-over-year growth. Its EPS is expected to increase 8.6% in fiscal 2022. AUDC’s stock price has surged 6.4% over the past year.
It’s no surprise that AUDC has an overall A rating, equating to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Quality and a B grade for Stability. Click here to see the additional POWR Ratings for AUDC (Growth, Momentum, Value, and Sentiment). AUDC is ranked #3 in the same industry.
Digi International Inc. (DGII)
Incorporated in 1985, DGII provides wireless communication and Internet-of-Things (IoT) connectivity products, services, and solutions. The company operates in two segments, IoT Products & Services; and IoT Solutions. DGII also provides professional services, such as site planning, implementation management, application development, customer training, and enhanced technical support services.
Last month, DGII launched Connect EZ®, a next-generation family of device servers providing connectivity for business, commercial, and industrial automation applications. The company believes that this device should modernize serial connectivity with LTE and Wi-Fi options and enhance manageability, security, intelligence, and performance while offering seamless connectivity for existing applications.
DGII’s revenue increased 8.1% year-over-year to $79.11 million for the fiscal fourth quarter ended September 30, 2021. The company’s gross profit grew 13.6% from the year-ago value to $42.63 million. Its operating income came in at $3.29 million during the period. Also, the company’s net income rose 3.5% from the prior-year quarter to $4.59 million.
Analysts expect DGII’s revenue for the fiscal year 2022 to be $368.07 million, representing a 19.3% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to grow 351.6% in fiscal 2021 and 24.3% next year. Its stock price has increased 31% over the past nine months.
DGII’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Sentiment and a B grade for Growth and Quality.
In addition to the POWR Rating grades I’ve just highlighted, one can see DGII’s ratings for Value, Stability, and Momentum here. DGII is ranked #1 in the same industry.
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VIAV shares were trading at $16.67 per share on Tuesday afternoon, down $0.27 (-1.59%). Year-to-date, VIAV has declined -5.39%, versus a -3.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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