Why Netgear Shares Dropped
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 network equipment maker Netgear dropped 10% today after the company reported earnings.
So what: Revenue was up 11.5% to $357.7 million and non-GAAP net income dropped slightly to $24.4 million, or $0.62 per share. Second-quarter results were ahead of expectations but the reason investors sold shares today was third quarter revenue guidance of $345 million to $360 million versus a $377 million estimate from Wall Street.
Now what: Guidance can often be more important than the previous quarter's earnings report, and that was clear from the market's reaction today. Keep in mind that even though guidance wasn't up to expectations, even the low end is 8% growth over 2012. Plus, the company has now beaten expectations for three quarters straight, so this isn't the end of the world. With shares trading at 15 times trailing earnings, I think the stock will recover from today's drop and move higher long-term.
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The article Why Netgear Shares Dropped originally appeared on Fool.com.Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends 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 Motley Fool has a disclosure policy.
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