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Following the release of Extreme Networks’ (NASDAQ:EXTR) second quarter results, the company’s stock has faced a slew of rating downgrades from Wall Street. Analysts at Rosenblatt and UBS have both trimmed their ratings after a market rout of its shares.
Rosenblatt Downgrade
Notably, analysts at Rosenblatt downgraded Extreme’s stock to Neutral from Buy, citing a mix of good and bad news in the company’s report. They expressed concerns about the lack of exciting near-term catalysts in the Enterprise Unified Access and Cloud space.
Despite recognizing improvements in bookings and robust Software as a Service (SaaS) growth, Rosenblatt has lowered the price target on Extreme’s shares to $15 from $19. They believe Extreme can attain normalized 10% plus revenue growth in FY’26, but historical performance suggests that 5% growth may be more typical.
UBS Rating Cut
In addition to Rosenblatt, UBS has also slashed Extreme’s rating to Neutral from Buy, accompanied by a price reduction to $14 from $22. UBS highlighted concerns regarding waning demand and inventory digestion impacting the company’s performance.
UBS analysts anticipate a decline in Networking industry spend across Campus/WLAN, emphasizing potential challenges for Extreme Networks over the next four quarters. They believe that Extreme’s run-rate revenue expectations need to be reset to around $1.1B with a shift in operating margin guide to 10% to 13%.
Market Sentiment and Analysis
Extreme Networks has received a Strong Sell rating at the Seeking Alpha Quant Rating system, in stark contrast to a more positive average rating from Seeking Alpha authors and Wall Street analysts, who both lean towards a Buy rating.
Wall Street analysts are perceiving a transformative phase in the Enterprise Networking market, emphasizing the need for catalysts, possibly in AI-based workflow automation and applications that drive increased networking investment.
