Yahoo Finance 'Compelling Long' – Raymond James bullish on Netgear amid Windward stake
Even-driven analysts at Raymond James came out with a bullish view on NETGEAR Inc (NASDAQ:NTGR), a beleaguered maker of networking equipment, after Windward Management, a Florida-based activist hedge fund, recently disclosed a 4.2% stake in the company, and Windward’s CEO Marc Chalfin published an open letter outlining massive value creation opportunities for NTGR.
“A recognized brand that is trading near a 10+ year low” and a stock “forgotten about by investors and even the sell-side” – in their latest note, the analysts largely echo Windward’s sentiment that the company’s COVID-19 misfortunes continue to abate and believe it’s a good time for investors to put NTGR on their “long radar.”
They reiterate key growth drivers and near-term catalysts, first pointed out in Marc Chalfin’s letter:
Strong cash position and free cash flow generation: at $289M, the current cash pile represents nearly 80% of the company’s market cap, implying very little value for NTGR’s actual business. With management’s guidance of “significant free cash flow in the coming quarters” – Raymond James agree with Windward’s push for a major ($100M+) stock buyback, calling it “one of the best uses of their cash.” Solid market position: At current prices, Netgear’s underlying business is priced at next to nothing, even though it remains a market leader with “a ~35% market share in the U.S. Consumer WiFi market.” High-margin, fast-growing NFB segment – the company’s “hidden gem.” Raymond James and Windward both agree that the segment alone is “likely worth the entire market capitalization.” Qualified New Leadership: Analysts are supportive of NTGR’s new CEO, CJ Prober, who made a tough call to destock. Despite ‘kitchen sinking results,’ they believe the decision “was crucial as it aligns the sell-in with sell-through.” Strong macro tailwinds: After facing nothing but headwinds over the past five years, NTGR may finally get two major tailwinds all at once: 1) a looming WiFi 7 upgrade cycle, and 2) potential effects of Routers Act – a Bipartisan bill that may lead to restrictions on or prohibitions of Chinese-made routers.
As such, Raymond James analysts believe Windward’s letter “shed light on the opportunity,” and see Netgear as a “compelling long.” They model “a share price range of $25-35, representing upside potential of over 100% from current levels.”
For more details on Windward’s NTGR thesis, see our breakdown of their open letter, and access exclusive comments made by Marc Chalfin to Investing.com.
Related Articles
'Compelling Long' – Raymond James bullish on Netgear amid Windward stake
