Why NETGEAR Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of networking equipment maker NETGEAR (NAS: NTGR) climbed 11% today after its quarterly results and outlook topped Wall Street estimates.

So what: NETGEAR shares have slid in recent months on worries over rising costs, but today's big first-quarter beat -- adjusted EPS of $0.73 versus the consensus of $0.68 -- suggests that those concerns are a tad overblown. Demand was particularly strong from service providers and in Asia, which is reigniting optimism over its long-term growth prospects as well.

Now what: Based on those tailwinds, management now sees second-quarter revenue of $315 million-$330 million, versus Wall Street's view of $320.3 million. "We expect to continue to benefit from the momentum on service provider demand in the second quarter 2012," Chairman and CEO Patrick Lo said. With the stock still down about 17% from its highs of just two months ago and trading at a forward P/E of 11, there might even be room to buy into that tailwind.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of NETGEAR. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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