Extreme Networks downgraded to Hold at Lake Street after outlook reduced

Lake Street analyst Eric Martinuzzi downgraded Extreme Networks to Hold from Buy with a price target of $19, down from $33. Extreme was “confidently anticipating” mid-teens revenue growth for FY24 up until about mid-September, but higher interest rates and softness in Europe, specifically Germany, have resulted in deal push-outs and buyer apprehension that has pushed the company to reduce its growth rate outlook to a range of 4%-9%, the analyst tells investors. The firm is modeling 0%-3% growth for the next three quarters and sees this outlook translating “into a near-term double-whammy of a lower multiple on lower earnings,” but adds that despite the “disappointing” FY24 top line forecast, Extreme’s new outlook calls for EPS growth of over 25% versus FY23.