Digi International Stock Pre-Market (-14%): Q2 Guidance Disappoints Despite Strong Q1 Beat

DGII, a company that sells mission-critical IoT connectivity hardware, software, and services, is trading sharply lower despite a Q1 earnings and revenue beat. The company posted record quarterly revenue and strong recurring revenue growth, but forward guidance appears to be the culprit for the negative sentiment. Is this a structural break or a knee-jerk overreaction?

The sell-off is not due to Q1 performance, which was strong. Revenue grew 18% YoY to $122.5M, and Annualized Recurring Revenue (ARR) surged 31% to $157M. This signals robust underlying demand.

• The core issue is the guidance for the upcoming quarter.
• Q2 revenue is guided to $124M – $128M.
• While showing slight sequential growth, this forecast may have underwhelmed investors expecting more.

But here is the interesting part. You are reading about this -14% move after it happened. The market has already priced in the news. To avoid the next loser before the headlines, you need predictive signals, not notifications. High Quality Portfolio has a risk model designed to reduce exposure to losers.

Playbook On Market Open

The market open will test whether strong Q1 results override weak Q2 guidance. Expect a battle between Gap & Go bullish attempts and Fade selling pressure, with market sentiment on forward guidance being key.

• PIVOT: $40.00 is critical. Reclaiming it signals bullish momentum.
• Strong buying on open could indicate a Gap & Go. Watch for immediate rejections of $40.
• Failure to hold $40 suggests further downside, confirming a Gap & Fade scenario.

Verdict

FADE THE GAP if DGII cannot reclaim and hold above $40.00 within the first 30 minutes. A failure to clear this pivot level will signal conviction in the weak Q2 guidance, likely leading to further downside.
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