A month has gone by since the last earnings report for NETGEAR, Inc. (NTGR Quick QuoteNTGR - Free Report) . Shares have added about 10.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NETGEAR, Inc. due for a pullback? 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 catalysts.

NETGEAR Q4 Earnings Beat Estimates

NETGEAR reported fourth-quarter 2023 non-GAAP earnings per share (EPS) of 9 cents against the non-GAAP loss per share of 3 cents recorded in the year-ago quarter. The reported figure surpassed the Zacks Consensus Estimate of earnings of 4 cents per share.

NETGEAR generated net revenues of $188.7 million, down 24.3% year over year. The downtick resulted from softness across CHP and SMB business owing to channel inventory compression. Also, high interest rates and stagnant or negative GTV growth in major markets such as Greater China, Germany and Japan were headwinds. However, the top line beat the consensus estimate by 2%.

Region-wise, net revenues from the Americas were $124.8 million (66% of total revenues), down 11.5% year over year. Europe, the Middle East and Africa generated revenues (20%) of $37.9 million, up 6.2% year over year. Revenues from the Asia Pacific region (14%) increased 22.9% to $25.9 million.
NETGEAR ended the quarter with 877,000 paid service subscribers.

Segmental Performance

Connected Home (including Orbi, Nighthawk, Nighthawk Pro Gaming, Armor, and Meural Brands) delivered revenues of $118.3 million, down 20.1% year over year. The downtick was due to the underperformance of the overall U.S. retail market overall. Continued momentum in premium CHP products, like Orbi 8 and 9, tri and quad-band WiFi mesh products and 5G Nighthawk Mobile Hotspots, acted as a tailwind.

NETGEAR holds about 35% share in the U.S. retail Wi-Fi market, including mesh, routers, gateways and extenders.

Despite a strong demand for ProAV-managed switched products, revenues from SMB declined 29.8% year over year to $70.2 million. The downtick was caused by continued channel inventory reductions by channel partners.

Other Details

Adjusted gross margin increased to 35% from 24.9% year over year. Non-GAAP operating income was $2.68 million against an operating loss of $3.91 million in the year-ago quarter.

Cash Flow & Liquidity

For the year ended Dec 31, 2023, NETGEAR generated $56.8 million in cash from operations. It also had $176.7 million in cash and cash equivalents and $264.3 million of total current liabilities compared with $228.1 million and $259.8 million, respectively, in the quarter that ended on Oct 1, 2023.

NTGR did not repurchase any shares in the quarter under review.

Q1 Outlook

For the first quarter of 2024, NETGEAR anticipates net revenues in the range of $155-$170 million. The company expects the retail portion of CHP business to experience a seasonal decline coming off the holiday period.

GAAP operating margin is estimated to be between (11.4)% and (8.4)%. Non-GAAP operating margin is expected to be in the band of (8.5)-(5.5)%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -103.51% due to these changes.

VGM Scores

At this time, NETGEAR, Inc. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, NETGEAR, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.