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Netgear (NTGR)
:NTGR

Netgear (NTGR) AI Stock Analysis

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Netgear

(NASDAQ:NTGR)

55Neutral
Netgear's stock score reflects a challenging financial environment with declining revenue and profitability issues, despite a strong balance sheet and cash flow. Technical indicators suggest cautious market sentiment, and the high P/E ratio points to potential overvaluation. Earnings call sentiments were mixed, balancing promising strategic initiatives with immediate operational challenges.

Netgear (NTGR) vs. S&P 500 (SPY)

Netgear Business Overview & Revenue Model

Company DescriptionNETGEAR, Inc. designs, develops, and markets networking and Internet connected products for consumers, businesses, and service providers. The company operates in two segments, Connected Home, and Small and Medium Business. It offers smart home/connected home/broadband access products, such as Wi-Fi routers and home Wi-Fi systems, broadband modems, Wi-Fi gateways, Wi-Fi hotspots, Wi-Fi range extenders, Powerline adapters and bridges, Wi-Fi network adapters, and digital canvasses; and value-added service offerings, including technical support, parental controls, and cybersecurity protection. The company also provides Ethernet switches, Wi-Fi mesh systems and access points, local and remote unified storage products, and Internet security appliances for small and medium-sized businesses, as well as education, hospitality and health markets. It markets and sells its products through traditional retailers, online retailers, wholesale distributors, direct market resellers, value-added resellers, and broadband service providers, as well as through its direct online store at www.netgear.com. in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was incorporated in 1996 and is headquartered in San Jose, California.
How the Company Makes MoneyNetgear generates revenue through the sale of its networking products across its two main segments: Connected Home and SMB. In the Connected Home segment, revenue is primarily driven by sales of Wi-Fi routers, mesh Wi-Fi systems, and smart home devices that cater to consumers looking to enhance their home network performance. The SMB segment contributes to revenue through the sale of network switches, access points, and network management solutions tailored for small to medium-sized businesses. The company leverages a distribution network that includes retailers, online marketplaces, and value-added resellers to reach its customers. Additionally, Netgear partners with internet service providers to offer its products as part of service bundles, further expanding its market reach and revenue potential.

Netgear Financial Statement Overview

Summary
Netgear is facing challenges with revenue and profit growth, indicated by declining revenue and inconsistent net margins. However, it has a strong balance sheet with low leverage and positive cash flow trends, showing potential for financial stability.
Income Statement
55
Neutral
Netgear's revenue has declined from 2020 to 2024, with the most recent annual revenue showing a decrease. Gross profit margin decreased from 2019 to 2024, indicating declining efficiency in managing production costs. The net profit margin improved in 2024 compared to 2023, moving from negative to positive, yet remains lower than earlier years, indicating challenges in maintaining profitability.
Balance Sheet
70
Positive
Netgear's balance sheet shows a stable equity base with a healthy equity ratio. The debt-to-equity ratio has improved over the years, reflecting better financial leverage management. However, the return on equity has been inconsistent, indicating fluctuating profitability relative to shareholder equity.
Cash Flow
65
Positive
The company has shown positive free cash flow growth in 2024, indicating improved cash generation from operations despite previous years of negative cash flows. The operating cash flow to net income ratio is strong, suggesting efficient conversion of income to cash.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
673.76M740.84M932.47M1.17B1.26B
Gross Profit
195.93M249.25M250.55M365.84M372.15M
EBIT
12.22M-33.27M5.96M66.60M56.61M
EBITDA
-65.80M-25.04M-23.82M80.50M94.47M
Net Income Common Stockholders
12.36M-104.77M-68.99M49.39M58.29M
Balance SheetCash, Cash Equivalents and Short-Term Investments
408.69M283.65M227.43M271.52M353.32M
Total Assets
850.23M847.14M1.02B1.08B1.11B
Total Debt
19.80M41.57M45.10M18.57M25.51M
Net Debt
-266.65M-135.15M-101.40M-245.20M-320.95M
Total Liabilities
309.16M311.65M398.93M381.72M416.65M
Stockholders Equity
541.07M535.50M620.86M696.82M689.38M
Cash FlowFree Cash Flow
155.80M51.05M-19.49M-14.44M170.85M
Operating Cash Flow
164.80M56.85M-13.73M-4.58M181.15M
Investing Cash Flow
-26.16M-27.43M-79.52M-9.98M-16.84M
Financing Cash Flow
-28.91M797.00K-24.02M-68.12M-8.06M

Netgear Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price24.72
Price Trends
50DMA
26.22
Negative
100DMA
25.85
Negative
200DMA
21.54
Positive
Market Momentum
MACD
-0.40
Negative
RSI
48.53
Neutral
STOCH
80.17
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTGR, the sentiment is Neutral. The current price of 24.72 is above the 20-day moving average (MA) of 24.14, below the 50-day MA of 26.22, and above the 200-day MA of 21.54, indicating a neutral trend. The MACD of -0.40 indicates Negative momentum. The RSI at 48.53 is Neutral, neither overbought nor oversold. The STOCH value of 80.17 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for NTGR.

Netgear Risk Analysis

Netgear disclosed 39 risk factors in its most recent earnings report. Netgear reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Netgear Peers Comparison

Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
FNFN
78
Outperform
$7.03B21.9518.88%14.83%28.84%
74
Outperform
$242.12B26.6720.02%2.63%-5.34%-30.57%
HPHPE
67
Neutral
$20.74B7.8112.09%3.29%10.93%43.19%
60
Neutral
$12.03B41.986.21%2.44%-8.82%-10.01%
58
Neutral
$21.03B10.28-16.29%2.47%4.45%-23.80%
55
Neutral
$713.64M63.632.30%-8.65%
44
Neutral
$1.85B-152.77%-24.49%-250.61%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
NTGR
Netgear
24.72
9.02
57.45%
CSCO
Cisco Systems
60.86
12.35
25.46%
EXTR
Extreme Networks
13.90
2.40
20.87%
FN
Fabrinet
196.14
7.31
3.87%
JNPR
Juniper Networks
36.12
-0.05
-0.14%
HPE
Hewlett Packard Enterprise
15.79
-1.66
-9.51%

Netgear Earnings Call Summary

Earnings Call Date: Feb 5, 2025 | % Change Since: -12.18% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant progress in NETGEAR's strategic focus and cash position, with strong growth in recurring revenue and the Pro AV segment. However, there were challenges such as revenue decline, supply constraints, and operating losses. The company is optimistic about 2025 with restructuring and investment plans.
Highlights
Strong Cash Position and Share Repurchase
NETGEAR ended 2024 with $409 million in cash and equivalents, up $125 million from the prior year. The company also repurchased over $33 million in stock.
Recurring Revenue Growth
NETGEAR's recurring revenue grew 25% year-over-year, ending 2024 with almost $35 million in annual recurring revenue.
Pro AV Segment Success
NETGEAR's Pro AV business experienced another record quarter of end-user sales, adding almost 50 new manufacturing partners, totaling over 370.
Settlement with TP-Link
NETGEAR settled a patent dispute with TP-Link, adding more than $100 million in cash to the balance sheet.
NFB Segment Growth
The NFB segment grew to $80.8 million in revenue for Q4, up 14.9% year-over-year.
Inventory Management Improvements
NETGEAR reduced finished goods inventory by $86 million or 35% from the previous year, achieving its objective of three months of supply.
Lowlights
Overall Revenue Decline
Quarterly revenue was $182.4 million, down 3.3% year-over-year.
Supply Constraints in Pro AV
Short-term supply constraints for Pro AV managed switch products are expected to impact Q1 2025, leading to muted top-line guidance for NFB.
Consumer Networking Market Contraction
The U.S. consumer networking market contracted in Q4, with CHP business revenue down 14.2% year-over-year.
Operating Losses
NETGEAR reported a non-GAAP operating loss of $49.6 million for the full year 2024, with a non-GAAP operating margin of negative 7.4%.
Company Guidance
During the conference call, NETGEAR provided guidance for the first quarter of 2025, highlighting expected net revenue in the range of $145 million to $160 million. The company anticipates maintaining a similar gross margin to the 32.8% reported in Q4 2024. However, due to seasonally lower revenue, the GAAP operating margin is expected to range from negative 16.4% to negative 13.4%, and the non-GAAP operating margin is projected to be between negative 10% and negative 7%. The guidance reflects challenges such as supply constraints for certain Pro AV managed switch products, which are expected to limit top-line growth potential. Despite these constraints, NETGEAR remains focused on long-term growth and profitability by investing in B2B go-to-market capabilities, software innovation, and a diversified product portfolio. The company also plans to continue its balanced capital allocation strategy, including share repurchases and potential acquisitions, while maintaining a strong cash position.

Netgear Corporate Events

Executive/Board Changes
Netgear Announces Departure of President David J. Henry
Neutral
Jan 7, 2025

Netgear has announced the separation of David J. Henry, the President and General Manager of Connected Home Products and Services, effective December 31, 2024. As part of his severance package, Mr. Henry will receive a lump sum equivalent to twelve months of his base salary, reimbursement for twelve months of COBRA premiums, and accelerated vesting of unvested stock units, along with potential eligibility for a bonus for the second half of 2024. These terms are in line with a previously disclosed severance agreement and reflect the company’s acknowledgment of his contributions.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.