In This Article:
Investing.com -- The past decade hasn’t been easy for NetGear, one of the world’s largest makers of networking equipment, but after years of structural and macro struggles that began before the COVID-19 pandemic, were exacerbated by it, and persisted in the aftermath, the skies finally appear to be clearing up,
Advertisement: High Yield Savings Offers
Driven by drastically improved operational performance under new management, and mounting uncertainties over its key China-based competitor TP-Link, NTGR saw its shares nearly double in 2024, placing the stock among the year’s top performers.
Windward Management, a Florida-based activist fund, took a stake in the company in May of 2024, and its CIO Marc Clalfin was among the first to publicly point out NTGR’s potential.
One year after he first bought the shares--now trading roughly 120% higher--Investing.com had a chance to chat with Marc Chalfin about where the stock is headed next, and he was as optimistic as ever.
Windward’s NTGR Stake
Windward took a 4.2% stake in NetGear in May of 2024 on a simple premise: it’s a solid, EBITDA-positive business, with a massive cash pile and a staggeringly depressed valuation – at the time, the company was trading at roughly its cash value, implying $0 value for the actual business.
Chalfin estimated the business can be worth far more than $0. He believed improved operations under then-newly installed management and catalysts--such as WiFi-7 upgrade cycle and looming legal action against its key competitor TP-Link--will make the company’s potential more evident to the market.
Fast forward one year, the assumptions proved well-founded.
Improving Operations
NetGear’s finances and operations have not looked this strong in years.
The company just delivered a solid Q1 beat--EPS of $0.02, far above the analyst estimate of a loss of ($0.37); revenue came in at $162.1 million vs estimate of $152.24 million—outperforming on both top and bottom lines.
Its top-performing segment, NETGEAR (NASDAQ:NTGR) (NASDAQ:NTGR) for Business (NFB), continued to grow at double digits, while margins for all three business segments have shown significant improvements.
Moreover, given the TP-Link situation, the company was able to gain market share for the first time in years.
Pressure on TP-Link Continues to Mount
TP-Link, a Chinese maker of networking equipment, is by far NetGear’s biggest competitor. Over the years, it has successfully cost-pressured NTGR out of the lower-priced consumer segment and now enjoys an over 60% market share in the U.S.
Given the current state of U.S.-China relations, questions about TP-Link’s dominance of the U.S. wireless market have been raised for a while now, but only recently have they gained real political traction.