DGII - Digi International Digging Into The Emerging IoT Service Opportunity

• Digi has been in business for a while, but the story is new as the company has been shifting more towards growing IoT opportunities, including hardware and monitoring services.
• I'm not too excited about the hardware opportunities, though the company's leverage to out-of-band solutions is an exception and could drive some worthwhile growth.
• SmartSense gives would-be IoT users the sensors, networking equipment, and software to deploy for functions like asset tracking and condition monitoring, with Digi collecting monthly service fees.
• I expect to see numerous companies offer similar services and similar models, potentially limiting margins and forcing companies like Digi to offer more distinct service/software capabilities.
• Digi shares look meaningfully undervalued below $20 on what I believe should prove to be conservative assumptions.

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