Netgear, Inc. Is Finally Back on Track

Say it with me, Netgear  (NASDAQ: NTGR  ) shareholders: It's about time!

On Friday, Netgear stock jumped 4% following the company's fourth-quarter earnings announcement. That may not sound like much, but remember it's the first such positive reaction Netgear investors have enjoyed in more than a year -- previous reports had been hampered by everything from higher-than-expected taxes to unexpected delays for new products and disappointing forward guidance.

To be sure, while I still thought the stock looked cheap three months ago, I couldn't help but wonder when Netgear would be able to finally put all the pieces together for a decent quarter.

Here's how Netgear fared this time
In the fourth quarter, Netgear posted adjusted earnings of $0.59 per share on sales of $356.6 million. Meanwhile, analysts were only looking for for earnings and revenue of $0.55 per share and $348.91 million, respectively.

Curiously enough, however, Netgear also told investors to expect current quarter revenue of $335 million to $350 million, the midpoint of which sits slightly below expectations for Q1 sales of $345.82 million. What's more, operating margin should decrease from 10.6% in Q4 to around 9% to 10% in Q1.

To be fair, that top-line miss wasn't that far off the mark, so the market seems willing to forgive considering Netgear's past history of exceeding top-line expectations. And the margin decline, for its part, can be attributed to Netgear's lower-margin service provider business, which is where Netgear accounts for revenue gained from its recently acquired AirCard business and expected to continue comprising a higher mix of overall revenue going forward.

What's more, Netgear management says they're finally seeing growth in market demand from their European commercial and retail segments, and that Europe is now expected to be a positive contributor to growth in 2014.

Better yet, while Netgear's high-end 802.11 AC devices were a huge driver behind the company's successful holiday season in the U.S., Netgear CEO C.S. Lo claims the rebound in Europe is happening despite its 802.11 AC devices only arriving in the region a few weeks ago.

And though Netgear's revenue growth looked sluggish in 2013 (clocking in at just 7.7% year over year), Lo also reminded investors of several new products in the pipeline, including their new Ocuity wireless IP home security cameras and an innovative HDMI dongle meant for service provider customers to replace set-top boxes. What's more, Lo says, the current quarter will also see the nationwide launch of Netgear's first 4G LTE gateway at Sprint.

Foolish takeaway
Around this time last year management was reiterating their goal of reaching $2 billion in revenue by the end of 2014. It seems unlikely they'll reach that number in time given the extended weakness in Europe, but this quarter appears to be the inflection point investors have waited for. If Netgear can continue to keep it together and its new products deliver the growth they expect, the stock could prove an absolute bargain right now, trading around 12 times next year's estimated earnings.

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