Why Shares of Netgear Inc. Slumped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What's Happening: Shares of networking company Netgear slumped on Friday after the company reported mixed first-quarter results and provided disappointing guidance. The stock was down about 12% as if 1 p.m.

Why It's Happening: Netgear managed to beat analyst estimates for revenue, although the company's $309.2 million of revenue for the quarter was down 11.5% year-over-year. Netgear attributes the decline to the restructuring of its service provider business, as well as the strengthening U.S. dollar.

Netgear missed analyst estimates for EPS, reporting a non-GAAP EPS of $0.46, five cents lower than what analysts were expecting and 22% lower compared to the same period last year. On a GAAP basis, EPS came in at $0.23, down 41% year-over-year.

Along with these mixed results, Netgear's guidance left a lot to be desired. The company expects second-quarter revenue to be between $270 million and $285 million, well below the $300 million analysts were expecting. Netgear's non-GAAP operating margin is also expected to fall sequentially during the second quarter, with the company expecting a range of 6%-7%, compared to the first quarter's 9.2%.

The first quarter was a tough one for Netgear, and the company faced some major headwinds. Going forward, Netgear expects to see significant improvement during the second half of this year, thanks to the completion of its restructuring plan as well as increased availability of Arlo, its smart home security camera.

The article Why Shares of Netgear Inc. Slumped Today originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. 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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