Netgear Falls on Weak 4Q Report, 1Q View

Shares of Netgear Inc. hit a new year low Thursday after the computer networking products maker posted a lower fourth-quarter profit and predicted first-quarter revenue below Wall Street estimates, leading analysts to cut their share price targets and earnings projections.

The stock fell $5.28, or 19.7 percent, to $21.59. The stock earlier set a low of $22.52 after ranging between $25 to $41.33 over the past year.

Late Wednesday, Netgear reported its quarterly profit fell 7 percent to 35 cents per share on higher freight costs. Excluding items, adjusted earnings were 41 cents per share, missing an average analyst forecast of 45 cents per share according to a Thomson Financial poll.

Netgear also projected first-quarter revenue of $201 million to $205 million, below analyst estimates of $207.4 million.

Following the earnings report, Lehman Brothers analyst Inder Singh reduced a share price target to $37 from $40, and modestly lowered quarterly earnings estimates for 2008.

In a research note Thursday, Singh said that Netgear's disappointing first-quarter guidance does not reflect normal seasonal trends. However, the analyst kept an "Overweight" rating, and noted that Netgear management indicated it expects to drive costs down in the coming quarters.

Goldman Sachs analyst Brantley Thompson in a Wednesday note to clients wrote that although Netgear's fundamentals remain solid, "we see limited near-term upside in Netgear shares given limited near-term catalysts and concern around execution."

The analyst cut his six-month share price target to $27.50 from $32, but maintained a "Neutral" rating. He said the company's shares are likely to remain range-bound.

RBC Capital Markets analyst Mark Sue reduced his price target to $28 from $38, and lowered his 2008 earnings projections.

"The market outlook for residential networking remains healthy and Netgear continues to make good progress with a broad product portfolio as well as increased traction with service provider customers, both existing and new," he wrote in a client note Thursday.

However, he added, "execution remains inconsistent, and considering our forward (earnings-per-share estimate) moves lower, we are maintaining our 'Sector Perform' rating."