Why Extreme Networks (EXTR) Stock Hit a 52-Week Low in After-Hours Trading Today

NEW YORK (TheStreet) -- Shares of Extreme Networks (EXTR) fell 26.9% to a new 52-week low of $2.75 after-hours Wednesday after issuing a warning for its fiscal first quarter.

The networking and communication hardware company said that it now expects a loss of 2 cents to break even for the fiscal first quarter, below its previous guidance of 6 cents to 8 cents a share. Exteme Networks expects revenue of $135 million to $136.5 million for the fiscal first quarter, down from $150 million to $155 million.

Analysts surveyed by Thomson Reuters expect earnings of 7 cents a share and revenue of $152.3 million for the fiscal first quarter.

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Extreme Networks said the lower estimates are due to a soft euro, political issues in Eastern Europe, and "significant delays" in closing North American deals.

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, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. 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 4.1%. Since the same quarter one year prior, revenues leaped by 97.4%. 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.
  • The gross profit margin for EXTREME NETWORKS INC is rather high; currently it is at 58.60%. 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 -10.34% is in-line with the industry average.
  • EXTR's debt-to-equity ratio of 0.78 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.94 is weak.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 609.8% when compared to the same quarter one year ago, falling from $3.18 million to -$16.23 million.
  • 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.
  • You can view the full analysis from the report here: EXTR Ratings Report

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