DGII Stock Bucks Bear Market Due to Industrial Internet of Things

DigiInternational (DGII) stock is trading at record levels following the latest earnings report and upbeat outlook for fiscal 2023. DGII stock is up 62% in 2022 amid a bear market and volatility in the Nasdaq Composite.




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Digi sells end-to-end solutions for the Industrial Internet of Things – internet-connected devices in factories, agriculture, telemedicine, retail, hospitality and other applications.

Based in Hopkins, Minnesota, Digi offers data collection 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 worldwide will triple to 18 billion between 2020 and 2030.

DGII Stock News: Top Earnings Views

For the fourth fiscal quarter ended Sept. 30, Digi reported adjusted earnings growth of 80% year over year to 45 cents a share. Revenue rose 34% to $105.7 million. The results beat consensus estimates of 41 cents per share on revenue of $100.4 million.

Digi beat estimates despite supply chain constraints during the period. DGII shares surged to a record high of 42.04 on Nov. 10, the day of the earnings report.

Customer demand remains strong amid fears that the US economy could slip into recession. Digi had an order backlog of $300 million as of Sept. 30, up from $250 million a year earlier, management told analysts. IoT Solutions annualized recurring revenue was $80 million for the September quarter.

For fiscal 2023, which begins with the December quarter, Digi is forecasting revenue growth of 10% amid ongoing supply chain constraints.

“We’re still at a point where our supply is constrained and, as we’ve mentioned in previous quarters, we have tens of millions of dollars on the table in this quarter alone,” Chief Executive Ronald Konezny said in September by Digi quarterly earnings call. “We work very, very closely with our customers to ensure their businesses are kept going. We don’t have enough parts to meet all requirements as you can see from this growing backlog.”

5G wireless business market

IoT deployments have traditionally relied on wireless networks, either over cellular or local Wi-Fi. The introduction of 5G wireless networks should give a boost to IoT applications.

Also, Digi sees greater demand for 5G networks for private businesses, Konezny told analysts.

5G networks improve latency, the delay time it takes for networks to respond. Analysts expect synergies between 5G networks and “edge computing”, the next generation of cloud computing.

Edge computing to advance the IoT

Edge computing provides data processing, storage, and connectivity near sensors and where other data is created. The aim is to process and analyze data locally in real time instead of sending it to remote data centers in the Internet cloud.

“We’re seeing customers see real value in the ROI (return on investment) of their industrial IoT initiatives,” said Konezny. “It helps them save on labor and energy costs. And in an increasingly inflationary environment, these are pretty powerful tools that are becoming much more urgent than discretionary.”

The DGII share takes first place Arista Networks (pages) in IBD’s Computer Networking Industry Group. Both stocks have a best possible IBD Composite Rating of 99.

Follow Reinhard Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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