Internet of Things leader Digi International finds itself in the sweet spot of the convergence of IoT, artificial intelligence, 5G, cloud computing and more. Now the fusing of IoT, AI and these other technologies has DGII stock in a buy zone with earnings due Aug. 3 before the market opens.
From vast oil fields and evolving smart cities to intensive care units and factory floors, Digi connects the millions of sensors, valves, and components critical to making today's brave new world a reality. The Minnesota-based company also uses IoT to enable mobile networks for public safety and emergency services as well as voice control for hands-free management of any interactive application.
Digi International continues to further drive these breakthrough advances with machine learning and AI. The company is well positioned to tap into and expand the AI revolution by combining the huge capacity of 5G with low-cost IoT devices and the distributed framework of edge computing.
With 15 global offices and over 500 employees, Digi serves more than 35,000 customers around the world.
Buoyed by the buzz around AI, Digi has connected with a spot on the IBD Breakout Stocks Index. The company — the original owner of the iMac trademark — was also featured in this column last month.
See Who Joins This IoT and AI Innovator On The IBD Breakout Stocks Index
Digi Senses — And Seizes — Opportunity With IoT And AI
Sporting a 96 Composite Rating, Digi joins Extreme Networks, Arista Networks and Cisco Systems among the top-rated companies in the computer networking group.
Over the past three quarters, the IoT firm has generated average earnings growth of just over 45%, including a 22% gain to 50 cents per share in Q1. Analysts forecast a 5% rise in Q2, with estimates of 17% for the full year.
Digi has posted revenue growth above $100 million in each of the past four quarters. First-quarter sales of $111.1 million — a 17% year-over-year gain — marked a fourth straight quarter of acceleration.
In a sign of strong institutional demand, 70 funds with an A+ or A rating from IBD have reported a position in DGII stock.
In June, Digi furthered its expansion of industrial IoT with the introduction of bold new features to SkyCloud, which offers state-of-the-art solutions for monitoring, analyzing and controlling field data. The latest enhancement of SkyCloud enables effortless systems integrations with remote monitoring and control solutions for industrial, agricultural and environmental industries.
Digi Digs Into Buy Zone, Riding AI And IoT Trends
After forming a handle earlier this month, DGII stock cleared a 40.02 buy point on July 12. It quickly became slightly extended, but has since eased back into buy range, which extends to 42.02. Volume at and since the breakout has been below average. Digi closed Wednesday's session 4% above the entry and within buy range.
Look for heavier trade to kick in to confirm demand among large investors.
Buying any stock just before it reports earnings is risky. Investors can reduce their risk and still reap rewards by waiting to see how the company reports and how Wall Street reacts.
Yet several technical factors bode well for Digi. The 50-day moving average recently jumped back above the shorter-term 200-day line. The 21-day exponential moving average crossed back above the 50-day line in May. DGII stock continues to find support above that benchmark.
While the relative strength line slumped at the end of last year, it sparked a solid rebound beginning in April. Look for the RS line to continue higher as Digi International seeks to continue riding the strong IoT and AI tail winds.
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Follow Matthew Galgani on Twitter at @IBD_MGalgani.
