NETGEAR Is A Buy, According To Wunderlich

NetGear, Inc. NTGR is poised to benefit from the trend of consumers increasingly deploying high performance networks in their homes, Wunderlich’s Matthew S. Robison said in a report. He initiated coverage of the company with a Buy rating and a price target of $55.

“Several industry growth factors are enabling NETGEAR to improve across all three corporate business units/segments, including growth faster than industry in the Retail segment, improving margins in the Service Provider segment, and prospects for reaccelerating revenue in the Commercial segment,” analyst Matthew Robison wrote.

Trends At Home

Consumers were opting for high performance networks to deliver high bandwidth at their homes for web entertainment on multiple devices. Often the data rates at home exceeded office desk. “As NETGEAR gains on the incumbents with each generation of products, larger businesses increasingly consider NETGEAR as an alternative, especially for smaller, more remote locations,” Robison mentioned.

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Consumers are willing to pay more for NETGEAR’s Nighthawk Wi-Fi routers. Consumers are looking for content and are willing to pay for the range and speed performance needed to deliver the content for whole home networking.

Commercial Improving

Channel destocking began in 4Q15 and NETGEAR started offering ProSAFE business Wi-Fi with support for increasingly popular web management. The company has also started offering a wider range of managed switches with high-speed multigig and 10Gigabit ports suited for large campus or education needs.

Service Provider Improving

Contribution margin in the Service Provider segment has begun to expand despite a decline in revenue. “The growing LTE Hotspot & Gateway business will soon be larger than cable and DSL and should become most of Service Provider segment revenue,” Robison added.