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Why Netgear Stock Jumped Today

By Evan Niu, CFA - Jul 23, 2020 at 1:40PM

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The home networking specialist reported strong earnings driven by the shift to remote work.

What happened

Shares of Netgear (NTGR 0.94%) have jumped today, up by 7% as of 12:40 p.m. EDT, after the networking equipment maker reported second-quarter earnings. The company is benefiting from the shift to remote work due to the COVID-19 pandemic.

So what

Revenue in the second quarter increased 21% to $280.1 million, which translated into adjusted earnings per share of $0.54. Those results blew past analysts' expectations of $235.3 million in revenue and $0.21 per share in adjusted profit. Adjusted operating income was $21 million. Remote workers have been upgrading their home networks, boosting the core connected home products (CHP) segment, while the small and medium-sized business (SMB) segment also performed well.

Illustration of a connected home with networking throughout

Image source: Getty Images.

"The surge in demand that began in March continued throughout the entire quarter and resulted in strong growth in both the retail and service provider channels for the CHP business," CEO Patrick Lo said in a statement. "The work-from-home transition taking place worldwide is driving the adoption of high performance WiFi at home as an indispensable necessity and, as the leader in WiFi 6 technology, we stand well positioned to enable this new reality."

Now what

Due to ongoing macroeconomic uncertainty related to the coronavirus crisis, Netgear is not providing specific guidance for the third quarter or full-year 2020. However, the company does expect demand to stay robust throughout the rest of the year.

"While we are confident in the ongoing strength of end market demand for home networks, there is still considerable uncertainty around the slowing or reversals of reopenings, new waves of Covid-19 and by extension the speed of the economic recovery worldwide in the second half of 2020," CFO Bryan Murray added. "This makes our most profitable business, SMB, difficult to forecast, and heightens the risk of supply chain disruption."

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Netgear. The Motley Fool has a disclosure policy.

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