Wunderlich calls the company's risk/reward "attractive."
"Since purchasing Enterasys, Extreme has gained scale and uniqueness as an enterprise focused network supplier with both switching and wireless. Growth opportunities are emerging with upgrade cycles: higher caliber wireless with analytics and network access control as well as Ethernet fabrics for virtualization and lower latency," the firm said, which placed a price target of $9 on the stock, which represents a 55% upside to Monday's close.
TheStreet Ratings team rates EXTREME NETWORKS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate EXTREME NETWORKS INC (EXTR) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EXTR's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 96.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, EXTR's share price has jumped by 63.52%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The gross profit margin for EXTREME NETWORKS INC is rather high; currently it is at 59.49%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -10.77% is in-line with the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, EXTREME NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$6.79 million or 762.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: EXTR Ratings Report