NETGEAR (NTGR) Surges 10.9%: Is This an Indication of Further Gains?

NETGEAR, Inc. (NTGR) shares ended the last trading session 10.9% higher at $24.46. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 9.5% gain over the past four weeks.

An increase in share price can be attributed to continuous momentum in the Enterprise segment, especially ProAV switches. The company benefits from the rising demand for robust networking solutions owing to the growing number of internet-connected devices, the shift from WiFi 5 and 6 to WiFi 6E and the anticipated WiFi 7, the growth of bandwidth-intensive applications such as 8K video streaming and gaming, coupled with anticipated AR or VR and the Metaverse. Recently, a report from Reuters stated that the FCC has banned new foreign-made consumer routers, particularly those from Chinese manufacturers.

This is likely to benefit NTGR because it reduces low-cost competition in the U.S. networking hardware market. Many budget routers sold in the U.S. come from Chinese brands, so restrictions could shift demand toward U.S.-based or approved vendors like Netgear. This may allow Netgear to gain market share, improve pricing power, and increase sales in its home networking and small business networking segments. Overall, the ban could act as a competitive tailwind for NTGR in the U.S. market.

This company is expected to post quarterly loss of $0.08 per share in its upcoming report, which represents a year-over-year change of -500%. Revenues are expected to be $152.5 million, down 5.9% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For NETGEAR, the consensus EPS estimate for the quarter has been revised 30.1% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on NTGR going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

NETGEAR is part of the Zacks Communication - Components industry. Harmonic (HLIT), another stock in the same industry, closed the last trading session 0.7% higher at $9.32. HLIT has returned -10% in the past month.

Harmonic's consensus EPS estimate for the upcoming report has changed -6.7% over the past month to $0.12. Compared to the company's year-ago EPS, this represents a change of +9.1%. Harmonic currently boasts a Zacks Rank of #4 (Sell).

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