What:Shares of Netgear rose 11.6% in July,according toS&P Capital IQdata, driven by the release of the networking specialist's strong second-quarter results. Even so, after two prior earnings disappointments earlier this year, Netgear still has plenty of ground to make up if it wants to beat the broader market in 2015:
So what: For perspective, in February Netgear stock plunged after it announced the restructuring of its service provider business, which was expected to suffer extended weakness as the customers it serves transition away from wireline investments in favor of wireless infrastructure. Then shares dropped again in April, when the company offered mixed first-quarter 2015 results amid that transition. All the while, Netgear's thriving retail segment continued to prop up the company as a whole.
In July, however, Netgear CEO Patrick Lo stated that the retail business shined even brighter in the second quarter, growing sales 19% year over and year and 9% sequentiallly "despite what is typically a seasonally down quarter."
Now what: For that, Netgear credited growth in both its new Arlo smart-home security-camera line, as well as its premium (and higher-margin) Nighthawk routers and gateways. In addition, Lo noted that the service provider restructuring was "substantially close to completion," paving the way for a much stronger second half of 2015.
For reference, Netgear hasn't provided full-year guidance. But analysts' consensus currently calls for Netgear to achieve 2015 revenue of $1.26 billion, and earnings of $1.88 per share. Whether Netgear lives up to those expectations remains to be seen. For now, though, given its current strength and with shares of Netgear trading at a reasonable 14.8 times next year's estimated earnings, it was hard to blame the market for bidding the stock up last month.
The article Why Netgear, Inc. Stock Jumped 11.6% in July originally appeared on Fool.com.
Steve Symington owns shares of Netgear. The Motley Fool recommends Netgear. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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