Why Guggenheim Likes This Tech Stock

The analyst said the stock has a "history of outperforming large incumbents"

Deputy Editor
Jun 19, 2019 at 11:45 AM
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The shares of networking hardware specialist NETGEAR Inc (NASDAQ:NTGR) have been struggling on the charts lately. The security has been on a downward spiral since its post-earnings bear gap in April, and hit multi-year lows earlier this month. This recent negative price action hasn't deterred one analyst, though. Guggenheim initiated coverage on NTGR earlier today, starting with a "buy" rating, and a $40 price target -- which is roughly a 57% premium to the stock's current perch at $26.31. Not only that, the $40 region recently served as pressure on the charts during the equity's rally in February. 

In the note, Guggenheim said the tech concern is well positioned for the second half of 2019, citing recent product launches and changes within the company. The analyst also looked at NTGR's "history of outperforming large incumbents and maintaining dominant market share by offering best in class technology." The broker's position isn't too far off from the rest of the analysts following the stock. Of the three other analysts in coverage, two give a "buy" recommendation. Plus, the consensus 12-month target price sits all the way up at $45.75 -- a 74% premium to current levels.

Looking back at the charts, NTGR is seeing a bump today, up 3.1% at last check. Plus, the equity is pacing for their first close atop the $26 region in nearly a month. And while the stock is down 18.5% year-to-date, it's also on course to close atop its 20-day moving average for the first time since April's detrimental bear gap.  

NTGR Chart June 19

Naturally, NTGR's recent behavior has had short sellers coming out of the woodwork. In the last two reporting periods short interest rose 5% to 2.21 million shares -- the most the security has seen this year. These shorts represent 7.2% of the stock's available float, or seven days of trading at its average pace. Should some of these pessimistic positions begin to unwind, a short squeeze could help propel the stock higher. 


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