The Toon finished fifth on the Premier League table last season and Shearer feels they could have pushed on this term if owner Mike Ashley had opened the purse strings during the summer transfer window.
"Newcastle missed a huge opportunity in the summer," Shearer wrote in his column for The Sun.
"Having punched above their weight last season and almost made it into the top four, this was the time to spend.
"The club was up and running again after so many years mired in uncertainty.
"There was once again a feel-good factor and even Mike Ashley was enjoying it. But he needed to put his hand in his pocket and strengthen with two or three quality players.
" The best time to buy is when you are in a position of strength.
"I know Newcastle do not have the spending power of those three, but they most certainly could have found the cash to significantly strengthen that squad."