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NETGEAR (NTGR) Down 16.6% 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 16.6% 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 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 catalysts.
NETGEAR Q4 Earnings and Revenues Top Estimates
NETGEAR reported fourth-quarter 2024 non-GAAP loss per share of 6 cents, which was significantly narrower than the Zacks Consensus Estimate of a loss of 25 cents. The company had reported non-GAAP earnings of 9 cents in the year-ago quarter.
NETGEAR generated net revenues of $182.4 million, beating the consensus estimate by 8.9%. The figure also beat the guidance of $160-$175 million. Revenues were down 3.3% on a year-over-year basis. The company completed a successful destocking plan, leading to a $86 million or 35% reduction in inventory in 2024. This is expected to help NETGEAR to align sell-in with sell-through with channel partners, thereby increasing revenue predictability. NETGEAR generated $35 million of recurring revenues in 2024. It now has 556,000 recurring subscribers.
NETGEAR noted that within NFB segment, though demand for its ProAV line of managed switches remains robust, it is witnessing lengthy lead times for supply. This is likely to result in lower shipping of these products in the first quarter, leading to a muted revenue performance.
Within the CHP segment, it is seeing signs of market stability and forecasts normal seasonality in the retail portion of this business for the first quarter. Revenues from the service provider channel are expected to be lower sequentially to $15 million, while overall first-quarter net revenues are predicted to be between $145 million and $160 million.
Quarter in Details
CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $101.6 million, down 14.2% year over year and 2.6% sequentially. The segment continues to witness strength in the premium products portfolio and saw positive demand trends for WiFi 7 Orbi and Nighthawk products. Revenues from the Service provider channel were $19.8 million, gaining from the strong uptake of Nighthawk 5G and WiFi 7 mobile hotspots, Nighthawk WiFi 7 routers and Orbi WiFi 7 mesh products.
Driven by ongoing momentum for ProAV managed switch products (which grew in double digits year over year), revenues from NFB segment jumped 14.9% year over year and 2.9% sequentially to $80.8 million.
Adjusted gross margin increased to 32.8% from 35% year over year. Non-GAAP operating loss was $4.2 million against operating income of $2.7 million in the year-ago quarter.
Non-GAAP operating expenses were $63.9 million, up 1%.
Region-wise, net revenues from the Americas were $122.9 million (67% of total revenues), down 1.6% year over year. Europe, the Middle East and Africa generated revenues (20%) of $35.9 million, down 5.2%. Revenues from the Asia Pacific region (13%) down 9% year over year to $23.6 million.
Cash Flow & Liquidity
For the quarter ended Dec. 31, 2024, NETGEAR generated $21.5 million in cash from operations.
It also had $408.7 million in cash and cash equivalents and short-term investments and $395.7 million of total current liabilities.
NETGEAR repurchased 423,000 shares worth $10.7 million in the quarter under review. In 2024, NETGEAR bought back $33.6 million worth of shares. The company has 3.4 million shares left under existing authorization.
First Quarter Guidance
The gross margin is expected to be the same as the fourth quarter of 2024.
Operating margins are likely to be affected by the muted top line.
GAAP operating margin is forecasted to be between (16.4)% and (13.4)%. Non-GAAP operating margin is estimated in the band of (10)-(7)%.
GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit estimated to be between $0.5 million and $1 million for the first quarter of 2025.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -15.05% due to these changes.
VGM Scores
Currently, NETGEAR has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 A. 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 has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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NETGEAR (NTGR) Down 16.6% 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 16.6% 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 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 catalysts.
NETGEAR Q4 Earnings and Revenues Top Estimates
NETGEAR reported fourth-quarter 2024 non-GAAP loss per share of 6 cents, which was significantly narrower than the Zacks Consensus Estimate of a loss of 25 cents. The company had reported non-GAAP earnings of 9 cents in the year-ago quarter.
NETGEAR generated net revenues of $182.4 million, beating the consensus estimate by 8.9%. The figure also beat the guidance of $160-$175 million. Revenues were down 3.3% on a year-over-year basis. The company completed a successful destocking plan, leading to a $86 million or 35% reduction in inventory in 2024. This is expected to help NETGEAR to align sell-in with sell-through with channel partners, thereby increasing revenue predictability. NETGEAR generated $35 million of recurring revenues in 2024. It now has 556,000 recurring subscribers.
NETGEAR noted that within NFB segment, though demand for its ProAV line of managed switches remains robust, it is witnessing lengthy lead times for supply. This is likely to result in lower shipping of these products in the first quarter, leading to a muted revenue performance.
Within the CHP segment, it is seeing signs of market stability and forecasts normal seasonality in the retail portion of this business for the first quarter. Revenues from the service provider channel are expected to be lower sequentially to $15 million, while overall first-quarter net revenues are predicted to be between $145 million and $160 million.
Quarter in Details
CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $101.6 million, down 14.2% year over year and 2.6% sequentially. The segment continues to witness strength in the premium products portfolio and saw positive demand trends for WiFi 7 Orbi and Nighthawk products. Revenues from the Service provider channel were $19.8 million, gaining from the strong uptake of Nighthawk 5G and WiFi 7 mobile hotspots, Nighthawk WiFi 7 routers and Orbi WiFi 7 mesh products.
Driven by ongoing momentum for ProAV managed switch products (which grew in double digits year over year), revenues from NFB segment jumped 14.9% year over year and 2.9% sequentially to $80.8 million.
Adjusted gross margin increased to 32.8% from 35% year over year. Non-GAAP operating loss was $4.2 million against operating income of $2.7 million in the year-ago quarter.
Non-GAAP operating expenses were $63.9 million, up 1%.
Region-wise, net revenues from the Americas were $122.9 million (67% of total revenues), down 1.6% year over year. Europe, the Middle East and Africa generated revenues (20%) of $35.9 million, down 5.2%. Revenues from the Asia Pacific region (13%) down 9% year over year to $23.6 million.
Cash Flow & Liquidity
For the quarter ended Dec. 31, 2024, NETGEAR generated $21.5 million in cash from operations.
It also had $408.7 million in cash and cash equivalents and short-term investments and $395.7 million of total current liabilities.
NETGEAR repurchased 423,000 shares worth $10.7 million in the quarter under review. In 2024, NETGEAR bought back $33.6 million worth of shares. The company has 3.4 million shares left under existing authorization.
First Quarter Guidance
The gross margin is expected to be the same as the fourth quarter of 2024.
Operating margins are likely to be affected by the muted top line.
GAAP operating margin is forecasted to be between (16.4)% and (13.4)%. Non-GAAP operating margin is estimated in the band of (10)-(7)%.
GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit estimated to be between $0.5 million and $1 million for the first quarter of 2025.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -15.05% due to these changes.
VGM Scores
Currently, NETGEAR has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 A. 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 has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.