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NETGEAR, Inc. (NTGR) Down 6.7% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is NETGEAR, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
NETGEAR Reports Narrower-Than-Expected Loss in Q4
NETGEAR reported fourth-quarter 2022 non-GAAP loss of 3 cents per share against non-GAAP earnings of 27 cents recorded in the year-ago quarter. However, it came in narrower than the Zacks Consensus Estimate loss of 8 cents per share.
NETGEAR generated net revenues of $249.1 million, down 0.8% year over year. The downtick resulted from the weakness in the retail segment of the connected home business, partly offset by strong revenue growth in the SMB segment. However, the top line beat the consensus estimate of $242.6 million.
Region-wise, net revenues from the Americas were $159.2 million (64% of net revenues), down 0.2% year over year. Europe, Middle East and Africa revenues (21%) were $52.7 million, up 5.4%. The Asia Pacific Region revenues (15%) were down 10.8% to $37.2 million.
The number of registered app users in the reported quarter was 16.2 million. NETGEAR ended the quarter with 747,000 paid service subscribers.
Segmental Performance
Connected Home (including Nighthawk, Orbi, Nighthawk Pro Gaming and Meural brands) delivered revenues of $149 million, down 14.4% year over year. The downtick was due to softness in the retail business, which had witnessed pandemic-led elevated consumer demand in the prior-year period. However, the segment witnessed strong demand for premium Wi-Fi mesh systems and 5G mobile hotspots.
Orbi 8 and Orbi 9 WiFi mesh products and 5G mobile hotspots helped the company to improve its connected home business. The company also unveiled M6 Pro 5G mobile hotspots to further grow its CHP business.
NETGEAR holds about 39% share in the U.S. retail Wi-Fi market, including mesh, routers, gateways and extenders.
In the quarter under review, the company announced the launch of WAX220 WiFi 6 AX4200 Dual-band Access Point (WAX220) to tap the growing demand for cheap and fast network connectivity. Customers can purchase the product for $199.99 from the company’s website and install the WiFi within 10 minutes without any complexity.
Driven by the strong demand for ProAV-managed switched products, revenues from SMB rose 29.9% year over year to $100.1 million.
Other Details
The adjusted gross margin decreased to 24.9% from 30% year over year due to lower revenues. The non-GAAP operating margin was (1.6)% compared with 2.7% in the year-ago quarter.
Cash Flow & Liquidity
As of Dec 31, 2022, NETGEAR used $13.7 million in cash from operations. As of Dec 31, 2022, the company had $146.5 million in cash and cash equivalents and $345.9 million of total current liabilities compared with $132.9 million and $330.4 million, respectively, in the quarter that ended Oct 3, 2022.
The company did not repurchase any shares in the quarter under review.
Q1 Outlook
For the first quarter of 2023, NETGEAR anticipates net revenues of $185-$200 million as the company remains optimistic that SMB and the CHP service provider channel will gain momentum amid supply-chain constraints.
The company anticipates that the service provider channel will generate about $25 million in sales in the first quarter.
Owing to increasing air freight costs and foreign currency volatility, the GAAP operating margin is estimated to be between (4.7)% and (3.7)%. The non-GAAP operating margin is expected to be between (2)% and (1)%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -166.67% due to these changes.
VGM Scores
Currently, NETGEAR, Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise NETGEAR, Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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NETGEAR, Inc. (NTGR) Down 6.7% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is NETGEAR, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
NETGEAR Reports Narrower-Than-Expected Loss in Q4
NETGEAR reported fourth-quarter 2022 non-GAAP loss of 3 cents per share against non-GAAP earnings of 27 cents recorded in the year-ago quarter. However, it came in narrower than the Zacks Consensus Estimate loss of 8 cents per share.
NETGEAR generated net revenues of $249.1 million, down 0.8% year over year. The downtick resulted from the weakness in the retail segment of the connected home business, partly offset by strong revenue growth in the SMB segment. However, the top line beat the consensus estimate of $242.6 million.
Region-wise, net revenues from the Americas were $159.2 million (64% of net revenues), down 0.2% year over year. Europe, Middle East and Africa revenues (21%) were $52.7 million, up 5.4%. The Asia Pacific Region revenues (15%) were down 10.8% to $37.2 million.
The number of registered app users in the reported quarter was 16.2 million. NETGEAR ended the quarter with 747,000 paid service subscribers.
Segmental Performance
Connected Home (including Nighthawk, Orbi, Nighthawk Pro Gaming and Meural brands) delivered revenues of $149 million, down 14.4% year over year. The downtick was due to softness in the retail business, which had witnessed pandemic-led elevated consumer demand in the prior-year period. However, the segment witnessed strong demand for premium Wi-Fi mesh systems and 5G mobile hotspots.
Orbi 8 and Orbi 9 WiFi mesh products and 5G mobile hotspots helped the company to improve its connected home business. The company also unveiled M6 Pro 5G mobile hotspots to further grow its CHP business.
NETGEAR holds about 39% share in the U.S. retail Wi-Fi market, including mesh, routers, gateways and extenders.
In the quarter under review, the company announced the launch of WAX220 WiFi 6 AX4200 Dual-band Access Point (WAX220) to tap the growing demand for cheap and fast network connectivity. Customers can purchase the product for $199.99 from the company’s website and install the WiFi within 10 minutes without any complexity.
Driven by the strong demand for ProAV-managed switched products, revenues from SMB rose 29.9% year over year to $100.1 million.
Other Details
The adjusted gross margin decreased to 24.9% from 30% year over year due to lower revenues. The non-GAAP operating margin was (1.6)% compared with 2.7% in the year-ago quarter.
Cash Flow & Liquidity
As of Dec 31, 2022, NETGEAR used $13.7 million in cash from operations. As of Dec 31, 2022, the company had $146.5 million in cash and cash equivalents and $345.9 million of total current liabilities compared with $132.9 million and $330.4 million, respectively, in the quarter that ended Oct 3, 2022.
The company did not repurchase any shares in the quarter under review.
Q1 Outlook
For the first quarter of 2023, NETGEAR anticipates net revenues of $185-$200 million as the company remains optimistic that SMB and the CHP service provider channel will gain momentum amid supply-chain constraints.
The company anticipates that the service provider channel will generate about $25 million in sales in the first quarter.
Owing to increasing air freight costs and foreign currency volatility, the GAAP operating margin is estimated to be between (4.7)% and (3.7)%.
The non-GAAP operating margin is expected to be between (2)% and (1)%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -166.67% due to these changes.
VGM Scores
Currently, NETGEAR, Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise NETGEAR, Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.