Rosenblatt Upgrades NETGEAR (NTGR) to Buy
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Rosenblatt upgraded NETGEAR (NASDAQ: NTGR) from Neutral to Buy with a price target of $61.00.
Analyst Kirk Adams commented, "Netgear reported strong earnings and revenues for 3Q16. Their retail business grew 18% yoy and the commercial business was up nearly 13% in the quarter. This led to revenues of $338.5M and earnings of $0.76, both well above street expectations. They guided between $340-$355M, a little short of street expectations, but the company said they were only expecting $55M of service provider revenue in 4Q17. This means that retail will be stronger than expected and margins will be slightly better. EMEA and APAC had excellent quarters as well. Free Cash Flow generation was strong at over $44M in the quarter. We do believe that Netgear has a great opportunity to continue to grow market share in their current markets and be successful in new IoT markets."
He added, "We are moving back to a Buy rating with a one-year price target of $61 based on 18.2x P/E of FY2017 earnings estimate of $3.35. We are giving Netgear’s valuation the benefit of higher gross and operating margins, excellent revenue growth in both their retail and commercial businesses and tremendous cash flow characteristics. We believe that new products and continued excellent execution will move shares higher. We lowered our rating to Neutral in late June as the stock ran up near $50 and we became concerned about valuation, but two excellent quarterly reports has motivated us to recommend buying these shares again."
Shares of NETGEAR closed at $54.40 yesterday.
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