Digi International stock is trading in record high territory in the wake of its recent earnings report and upbeat fiscal 2023 outlook. DGII stock has jumped 62% in 2022 amid a bear market and volatility in the Nasdaq composite.
Digi sells end-to-end solutions for the industrial Internet of Things — web-connected devices in factories, agriculture, telemedicine, retail stores, food services and other applications.
Hopkins, Minn.-based Digi provides data-gathering sensors, network routers and gateways, and software. The company is transitioning to managed IoT services after acquiring Ventus Holdings in 2021 for $347.4 million in cash.
Research firm Gartner estimates that the number of IoT devices globally will triple to 18 billion from 2020 to 2030.
DGII Stock News: Earnings Top Views
In its fiscal fourth quarter that ended Sept. 30, Digi reported adjusted earnings growth of 80% year over year to 45 cents a share. Revenue climbed 34% to $105.7 million. Its results topped consensus estimates of 41 cents in per-share profit on revenue of $100.4 million.
Digi topped estimates despite having supply chain constraints in the period. DGII stock surged to a record high of 42.04 on Nov. 10, the day of its earnings report.
Customer demand has remained strong amid worries the U.S. economy could fall into a recession. Digi had an order backlog of $300 million as of Sept. 30 vs. $250 million a year earlier, management told analysts. Annualized recurring revenue from IoT Solutions came in at $80 million in the September quarter.
For fiscal 2023, which starts with the December quarter, Digi forecast revenue growth of 10% amid continued supply chain constraints.
"We're still at that point where we're supply-constrained and — like we mentioned in prior quarters — we're leaving tens of millions of dollars on the table just in the quarter," Chief Executive Ronald Konezny said on Digi's September-quarter earnings call. "We're working very, very closely with our customers to make sure that their businesses are kept running. We don't have enough parts to meet all the demands, as you can see from that growing backlog number."
5G Wireless Business Market
IoT deployments have depended on wireless networks, either long-distance cellular or local Wi-Fi. The rollout of 5G wireless networks is expected to give IoT applications a boost.
Also, Digi is seeing more demand for private business 5G networks, Konezny told analysts.
5G networks improve latency, the lag time it takes networks to respond. Analysts expect synergy between 5G networks and "edge computing," the next-generation of cloud computing.
Edge Computing To Boost IoT
Edge computing deploys data processing, storage and networking close to sensors and where other data originates. The goal is to process and analyze data locally in real time rather than send it to faraway data centers in the internet cloud.
"We are seeing that customers see real value in the ROI (return on investment) from their industrial IoT initiatives," Konezny said. "It's helping them save on labor, on energy costs. And in a rising inflationary environment, those are pretty powerful tools that become much more urgent than discretionary."
DGII stock is tied for first place with Arista Networks in IBD's computer networking industry group. Both stocks have a best-possible IBD Composite Rating of 99.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
