Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

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Equity Bottom-Up

<ul>
<li>NTGR is making a CEO change just as the business has stabilized. Patrick Lo has retired and is being replaced by CJ Prober </li>
<li>NTGR has also issued updated fourth quarter results with the business achieving positive non-GAAP operating margin</li>
<li>NTGR is forecasting revenue of between $179 million and $189 million. We were already projecting revenue of $187.3 million and are keeping our estimate unchanged</li>
</ul>


NTGR is making a CEO change just as the business has stabilized. Patrick Lo has retired and is being replaced by CJ Prober 
NTGR has also issued updated fourth quarter results with the business achieving positive non-GAAP operating margin
NTGR is forecasting revenue of between $179 million and $189 million. We were already projecting revenue of $187.3 million and are keeping our estimate unchanged


<ul>
<li>NTGR should have ended 2023 on a positive note with demand for wireless routers showing continued pace of recovery after more than two years of sluggish growth.</li>
<li>NTGR’s focus on higher end products has put greater emphasis on profitability and converting customers to subscribers</li>
<li>NTGR’s focus on premium priced devices should push profit margins up if it was not for higher cost inventory NTGR is trying to clear out</li>
</ul>


NTGR should have ended 2023 on a positive note with demand for wireless routers showing continued pace of recovery after more than two years of sluggish growth.
NTGR’s focus on higher end products has put greater emphasis on profitability and converting customers to subscribers
NTGR’s focus on premium priced devices should push profit margins up if it was not for higher cost inventory NTGR is trying to clear out


<ul>
<li>NTGR has brought back the goal of achieving double digit operating margin after three years of underperformance while turning the business around.</li>
<li>Unlike prior years where NTGR was relying on unit volume growth to drive operating leverage, NTGR now has a growing base of subscription revenue that is contributing to earnings</li>
<li>NTGR’s annual investor day highlighted the expectation of exiting 2023 with annual recurring revenue (“ARR”) of $40 million and $50 million in 2024</li>
</ul>


NTGR has brought back the goal of achieving double digit operating margin after three years of underperformance while turning the business around.
Unlike prior years where NTGR was relying on unit volume growth to drive operating leverage, NTGR now has a growing base of subscription revenue that is contributing to earnings
NTGR’s annual investor day highlighted the expectation of exiting 2023 with annual recurring revenue (“ARR”) of $40 million and $50 million in 2024


<ul>
<li>NTGR benefited from an increase in demand for premium wireless mesh systems and routers in the third quarter resulting in a non-GAAP profit</li>
<li>The return of normalcy should allow NTGR to convert its on hand inventory to cash over the next two quarters. NTGR’s cash balance should continue to rise</li>
<li>A softer environment for SMB products forces us to reassess our model with NTGR guiding gross margin down</li>
</ul>


NTGR benefited from an increase in demand for premium wireless mesh systems and routers in the third quarter resulting in a non-GAAP profit
The return of normalcy should allow NTGR to convert its on hand inventory to cash over the next two quarters. NTGR’s cash balance should continue to rise
A softer environment for SMB products forces us to reassess our model with NTGR guiding gross margin down


<ul>
<li>The third quarter could become a defining moment for NETGEAR (NTGR) and its stock price.</li>
<li>With less than a week left in the third quarter, we have observed how the return of seasonality has reduced the frequency and depth of discounts</li>
<li>Seasonality has not been present in NTGR’s business since 2019. As a result, investors might be neglecting the lift in demand NTGR could experience</li>
</ul>


The third quarter could become a defining moment for NETGEAR (NTGR) and its stock price.
With less than a week left in the third quarter, we have observed how the return of seasonality has reduced the frequency and depth of discounts
Seasonality has not been present in NTGR’s business since 2019. As a result, investors might be neglecting the lift in demand NTGR could experience


United States

NETGEAR, Inc. provides networking products designed for small businesses and homes.  The Company's suite of products enables small businesses and homes to share Internet access, peripherals, digital content, and applications among multiple personal computers and other Internet-enabled devices.  NETGEAR markets and sells its products through distributors to a network of resellers.

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