Shares of Netgear, Inc (NASDAQ: NTGR) surged to well over 30 per cent after the announcement of a major litigation settlement, and a positive revision of its Q3 revenue guidance.
Netgear explained on Thursday that it had settled all pending litigation with TP-Link Systems, a notable player in the whole home mesh Wi-Fi systems market. The settlement resulted in Netgear receiving a substantial payment of USD$135 million. This resolution not only cleared the legal overhang but also provided Netgear with a considerable cash influx, which investors viewed positively, reflecting in the stock’s immediate price jump.
Furthermore, Netgear revealed the early launch of its next-generation 5G mobile hotspot.
Originally slated for a Q4 release, this product’s introduction in Q3 was a strategic move to capitalize on the growing demand for high-speed mobile connectivity. This decision was part of Netgear’s broader strategy to innovate and expand its product offerings, aiming to capture market share in the burgeoning 5G sector.
However, the most immediate market-moving news was Netgear’s upward revision of its Q3 revenue guidance.
Initially set at USD$160-175 million, the new forecast now stands at USD$170-180 million. This adjustment was largely attributed to the early launch of the 5G hotspot and the positive cash flow from the settlement, which together signalled to investors a robust financial health and operational efficiency.
Analysts have noted that while Netgear had been facing challenges with declining sales since 2021, the recent developments could mark a turnaround.
The cash from the settlement, coupled with the strategic product launch, positions Netgear to potentially accelerate its inventory reduction efforts and improve cash flow, which had been a point of concern for investors.
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Institutional investors own 82% of the stock
Hedge funds and institutional investors have recently adjusted their stakes in Netgear.
Headlands Technologies LLC acquired a new stake in the company during the first quarter, valued at around USD$30,000.
Meanwhile, Quest Partners LLC took a new position in Netgear shares in the fourth quarter, worth approximately $53,000.
Allspring Global Investments Holdings LLC increased its stake in Netgear by 229.2 per cent in the first quarter. After purchasing an additional 6,921 shares last quarter, Allspring now owns 9,940 shares of the communications equipment provider, valued at USD$157,000.
The State Board of Administration of Florida Retirement System also purchased a new position in Netgear shares during the first quarter, worth around USD$176,000.
Furthermore, Aigen Investment Management LP raised its stake in Netgear by 57.9 per cent in the fourth quarter, buying 6,772 more shares and now holding 18,467 shares, valued at USD$269,000. Institutional investors own 82.97 per cent of the stock.
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