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Netgear Inc. Message Board

  • jimturner54321 jimturner54321 Feb 14, 2012 1:34 AM Flag

    The Bull Case for NTGR (article)

    The bull case for Netgear
    Last week, this computer networking specialist beat Wall Street earnings estimates, and raised its guidance for the year. Wall Street took one look at the results and, um ... sold off Netgear by as much as 12%.

    Why? One analyst who downgraded the stock (Deutsche Bank) worried that the company plans to ramp up R&D spending in the year ahead, and that seems to be a common concern -- that costs are rising, and thus will crimp profit margins going forward. Not everyone's scared, though. CAPS All-Star PearlandTX, for example, likes the "strong consumer market position" that Netgear has built.

    2gud2btrue calls the company a "solid mid cap," while pfountaine thinks "they look like they've figured it out."

    I think so, too. Consider: Right now, Cisco (Nasdaq: CSCO ) is in a quandary, refocusing on Internet backbone switches and routers, and trying to figure out just exactly what role it wants to play in the consumer space (and what role Linksys will play) going forward. So what does Netgear do? It takes advantage of the situation, and doubles down on its own home-networking businesses with additional R&D spending. That sounds like a savvy business move to me.

    As for the stock itself, I just don't get the logic of downgrading a stock right after a "beat and raise." Especially not a stock like Netgear, which boasts strong free cash flow, $350 million in the bank, a 15 P/E, and a 17.6% growth rate. Everything about this stock tells me it's underpriced and underappreciated, and poised to bounce right back in coming quarters. I'm so convinced of this, in fact, that right now I'm heading over to Motley Fool CAPS to recommend Netgear as an "outperformer." Want to see how it works out? Follow along, and feel free to tell me if you think I'm wrong.

    Like fast-growing tech bargains like Netgear? Then you're going to love our next big tech winner. Read all about it in the Fool's new -- and free! -- report: "The Next Trillion Dollar Revolution."

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