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Why Is NETGEAR, Inc. (NTGR) Down 1.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have lost about 1.8% 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 its most recent earnings report in order to get a better handle on the important drivers.
NETGEAR Q3 Earnings & Revenues Beat Estimates
NETGEAR reported third-quarter 2022 non-GAAP earnings of 21 cents per share compared with non-GAAP earnings of 50 cents recorded in the year-ago quarter. However, it surpassed the Zacks Consensus Estimate of 8 cents per share.
NETGEAR generated net revenues of $249.6 million, down 14% 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 $242.8 million.
Region-wise, net revenues from the Americas were $169.4 million (67.9% of net revenues), down 13.2% year over year. EMEA (Europe, Middle East and Africa) revenues (18%) were $44.8 million, down 21.3%. APAC (the Asia Pacific Region) revenues (14.1%) were down 7.1% to $35.4 million.
The number of registered app users in the reported quarter was 15.5 million. NETGEAR ended the quarter with 666,000 paid service subscribers, marking year-over-year growth of 20.7%.
Segmental Performance
Connected Home (including Nighthawk, Orbi, Nighthawk Pro Gaming and Meural brands) delivered revenues of $150.6 million, down 27.8% 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 in retail and service channels.
Quad-band Orbi 9 and 5G millimeter wave mobile hotspots helped the company to improve its connected home business. The company also introduced Orbi 860 Series to update its existing Orbi 850 Series. The new product also includes a one-year free subscription to NETGEAR Armor, which provides cybersecurity against hackers.
NETGEAR holds about 42% 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 WAX628 and WAX638E Wi-Fi 6 and 6E access points and services to tap the residential installer market. The new system extends the Wi-Fi range without using ethernet wiring and can be paired with all the existing Wi-Fi endpoints.
Driven by the strong demand for ProAV-managed switched products, revenues from SMB rose 21.3% year over year to $99 million. Amid supply-chain constraints, the segment showcased strong operational execution and gained from the growing demand for digital AV-over-IP Ethernet solutions by the AV industry.
Other Details
The adjusted gross margin decreased to 27.6% from 30.1% year over year due to lower revenues. The non-GAAP operating margin was 0.7% against 6.7% in the year-ago quarter.
Cash Flow & Liquidity
In the third quarter, NETGEAR used $15.2 million in cash from operations. As of Oct 2, 2022, the company had $132.9 million in cash and cash equivalents, and $330.4 million of total current liabilities compared with $149 million and $305.1 million, respectively, in the quarter ended Jul 3, 2022.
The company did not repurchase any shares in the quarter under review.
Q3 Outlook
For the fourth quarter of 2022, NETGEAR anticipates net revenues of $235-$250 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 $50 million in sales in the fourth quarter.
Owing to increasing air freight costs and increasing foreign currency volatility, the GAAP operating margin is estimated to be between (4.2)% and (3.2)%.
The non-GAAP operating margin is expected to be between (2)% and (1)%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -311.11% due to these changes.
VGM Scores
At this time, NETGEAR, Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.
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Why Is NETGEAR, Inc. (NTGR) Down 1.8% Since Last Earnings Report?
A month has gone by since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have lost about 1.8% 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 its most recent earnings report in order to get a better handle on the important drivers.
NETGEAR Q3 Earnings & Revenues Beat Estimates
NETGEAR reported third-quarter 2022 non-GAAP earnings of 21 cents per share compared with non-GAAP earnings of 50 cents recorded in the year-ago quarter. However, it surpassed the Zacks Consensus Estimate of 8 cents per share.
NETGEAR generated net revenues of $249.6 million, down 14% 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 $242.8 million.
Region-wise, net revenues from the Americas were $169.4 million (67.9% of net revenues), down 13.2% year over year. EMEA (Europe, Middle East and Africa) revenues (18%) were $44.8 million, down 21.3%. APAC (the Asia Pacific Region) revenues (14.1%) were down 7.1% to $35.4 million.
The number of registered app users in the reported quarter was 15.5 million. NETGEAR ended the quarter with 666,000 paid service subscribers, marking year-over-year growth of 20.7%.
Segmental Performance
Connected Home (including Nighthawk, Orbi, Nighthawk Pro Gaming and Meural brands) delivered revenues of $150.6 million, down 27.8% 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 in retail and service channels.
Quad-band Orbi 9 and 5G millimeter wave mobile hotspots helped the company to improve its connected home business. The company also introduced Orbi 860 Series to update its existing Orbi 850 Series. The new product also includes a one-year free subscription to NETGEAR Armor, which provides cybersecurity against hackers.
NETGEAR holds about 42% 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 WAX628 and WAX638E Wi-Fi 6 and 6E access points and services to tap the residential installer market. The new system extends the Wi-Fi range without using ethernet wiring and can be paired with all the existing Wi-Fi endpoints.
Driven by the strong demand for ProAV-managed switched products, revenues from SMB rose 21.3% year over year to $99 million. Amid supply-chain constraints, the segment showcased strong operational execution and gained from the growing demand for digital AV-over-IP Ethernet solutions by the AV industry.
Other Details
The adjusted gross margin decreased to 27.6% from 30.1% year over year due to lower revenues. The non-GAAP operating margin was 0.7% against 6.7% in the year-ago quarter.
Cash Flow & Liquidity
In the third quarter, NETGEAR used $15.2 million in cash from operations. As of Oct 2, 2022, the company had $132.9 million in cash and cash equivalents, and $330.4 million of total current liabilities compared with $149 million and $305.1 million, respectively, in the quarter ended Jul 3, 2022.
The company did not repurchase any shares in the quarter under review.
Q3 Outlook
For the fourth quarter of 2022, NETGEAR anticipates net revenues of $235-$250 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 $50 million in sales in the fourth quarter.
Owing to increasing air freight costs and increasing foreign currency volatility, the GAAP operating margin is estimated to be between (4.2)% and (3.2)%.
The non-GAAP operating margin is expected to be between (2)% and (1)%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -311.11% due to these changes.
VGM Scores
At this time, NETGEAR, Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.