Why NetGear (NTGR) Bombed Today

Tickers in this article: NTGR

NEW YORK (TheStreet) -- NetGear  bombed 9.6% to $29.07 after revised fourth-quarter guidance fell short of expectations.

The network hardware maker expects fourth-quarter revenue within the range of $340 million and $355 million. Analysts surveyed by Thomson Reuters were expecting revenue of $368.7 million.

Though fourth-quarter forecasts disappointed, third-quarter results beat Wall Street's expectations. Revenue rose 14.8% year on year to $361.9 million, $7.8 million higher than predicted. Earnings were 58 cents a share, compared to 65 cents a year ago, while gross margin continued to decline to 28.9% from 29.8% a quarter earlier and 31.6% in the prior year's quarter.

Europe, the Middle East and Africa (EMEA) proved troublesome to the business' top line. Net revenue fell 6.8% year on year and 10.3% quarter over quarter in the region.

"Our short and immediate-term visibility remains limited caused by the continued economic headwinds faced in Europe," said CFO Christine M. Gorjanc in a conference call.

"Even though we have grown tremendously in America as well as in Asia, it was fully negated by the decline in EMEA," added CEO Patrick Lo.

Wedbush Securities downgraded its rating to "neutral" from "outperform" and lowered its price target to $31 from $36.

TheStreet Ratings team rates NetGear Inc as a Buy with a ratings score of B-. The team has this to say about its recommendation:

"We rate NetGear Inc (NTGR) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."