New Netgear Trade Idea After FCC Ban Drives a Boost
With a potential exception to a new rule on the way, here's an idea for day traders.
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New York Stock Exchange Wall Street
It happened overnight. The Federal Communications Commission (FCC) announced a ban on the sale of new foreign-made consumer router models.
More than 60% of routers sold in the U.S. are estimated to have been manufactured in mainland China. According to the federal agency, cyberattacks on small businesses and households in the U.S. have been on a rapid rise since 2024. The FCC feels that this is at least partially due to national security concerns posed by foreign-made routers. Routers that are already here and have already been approved are still eligible for sale in the U.S. This is for new routers.
Netgear (NTGR) is an interesting case. The firm is headquartered in the U.S., and its equipment is designed in the U.S. However, that gear is manufactured elsewhere and would be included in the ban. Netgear, some expect, will be granted a conditional approval as a U.S. company by either the Department of Defense/War or Department of Homeland Security. Shortly after the opening bell in New York, NTGR is trading up almost 10% from its Monday evening closing price.
Could Use the Help
Netgear could use the help. The firm posted adjusted earnings and revenue beats for its fiscal fourth quarter. Those results were released in early February. There was no sales growth, however. For the current quarter, which is due to be reported in late April, the few analysts that actually cover this name are looking for an adjusted EPS of -$0.08 on revenue of $158.7 million. That number would be good for a year-over-year contraction of roughly 2%.
Interestingly, on this news, analyst Tore Svanberg of Stifel Nicolaus who is rated at five stars (out of five) by TipRanks, opined on the stock. Svanberg reiterated both his "Buy" rating and his $36 target price. The stock is not heavily followed on Wall Street.
The Chart
Readers will see that NTGR broke out of a falling-wedge of bullish reversal in February and treaded water until this news broke. It is then that the shares broke above their 50-day SMA at $21. That would put the target, technically, at $26, which is where the 200-day SMA stands. For that reason, I would not purchase these shares unless they either fell back towards the 50-day SMA or took and held the 200-day SMA on momentum.
I would not initiate this name close to but below that thin red line. That said, both relative strength and the daily MACD are looking more bullish than they were. NTGR options are not all that liquid, so that is not really a viable route to travel. A day trader might try to play the space between the two lines should the stock make another run at the 200-day.
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At the time of publication, Guilfoyle had no positions in any securities mentioned.
