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Is Extreme Networks (EXTR) a Smart Long-Term Buy?

·2 min read

Voss Capital, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. In Q2 2022, the Voss Value Fund, LP, and the Voss Value Offshore Fund, Ltd., returned -10.3% and -10.4% to investors net of fees and expenses, respectively. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Voss Capital mentioned Extreme Networks, Inc. (NASDAQ:EXTR) and explained its insights for the company. Founded in 196, Extreme Networks, Inc. (NASDAQ:EXTR) is a San Jose, California-based network equipment company with a $1.8 billion market capitalization. Extreme Networks, Inc. (NASDAQ:EXTR) delivered a -10.06% return since the beginning of the year, while its 12-month returns are up by 30.38%. The stock closed at $14.12 per share on September 02, 2022.

Here is what Voss Capital has to say about Extreme Networks, Inc. (NASDAQ:EXTR) in its Q2 2022 investor letter:

"EXTR is now the Voss Value Fund’s third largest position at 10% of the portfolio (behind GFF and SWIR). EXTR is a leader in wireless and wired networking equipment (switchesaccess pointsrouters), particularly in large scale, complex wi-fi deployments such as hospitals and sprawling university campuses. The Fund has owned EXTR since the middle of 2020 and have previously shared our research on it publicly (see the Voss Q3 2020 Quarterly Letter).

At the start of 2020, the company had a >3.0x net leverage ratio and new product orders briefly collapsed around the Covid-related shutdowns. Fast forward to today and leverage is under 1.0x and the shares are even cheaper at 7.5x our next twelve months' free cash flow estimate (as of the middle of July), despite their product order backlog being well over 10x what is historically normal. In other words, right as its valuation hits a historic low on a free cash flow basis, we believe the company’s visibility has never been higher..." (Click here to see the full text)

best SaaS stocks to buy and hold for long term profits
best SaaS stocks to buy and hold for long term profits

Photo by Austin Distel on Unsplash

Our calculations show that Extreme Networks, Inc. (NASDAQ:EXTR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Extreme Networks, Inc. (NASDAQ:EXTR) was in 20 hedge fund portfolios at the end of the second quarter of 2022, compared to 18 funds in the previous quarter. Extreme Networks, Inc. (NASDAQ:EXTR) delivered a 40.64% return in the past 3 months.

In February 2022, we published an article that includes Extreme Networks, Inc. (NASDAQ:EXTR) in Top 5 Stock Picks of Travis Cocke's Voss Capital. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.