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Why Netgear, Inc. Fell 11% in May

By Anders Bylund – Jun 8, 2017 at 9:15PM

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This long, slow plunge was the result of insufficiently impressive earnings at the end of April plus perhaps a security misunderstanding near the middle of the month.

What happened

Shares of networking equipment maker Netgear (NTGR 0.20%) fell 11% in May 2017, according to data from S&P Global Market Intelligence.

So what

Netgear actually had nothing but good news and product announcements to share last month, and Wall Street analysts generally held their tongue as well. However, the drop followed a dramatic earnings-related plunge at the tail end of April, and negative momentum from that event could easily explain Netgear's stock chart in May.

Then the stock picked up steam again in early June, recovering to the tune of 7% in less than five market days. Overall, Netgear has traded roughly sideways since the end of April.

Network cables tied up with a padlock.

Image source: Getty Images.

Now what

The worst part of Netgear's slide in May coincided with the spread of a highly publicized piece of malicious software known as WannaCry. But Netgear products were never vulnerable to this attack, which exploits weaknesses in a very old network storage technology, so any link from that malware to Netgear's share price would be misguided.

Netgear's share prices have fallen 17% year to date, but have still comfortably outpaced the market since the summer of 2015. At the same time, short interest in this stock is high and rising, with 9.9% of the float sold short in the latest available update. Investors should expect Netgear shares to continue their volatile ways until that amplifier of price swings goes away.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Netgear. The Motley Fool has a disclosure policy.

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