Back to top

Analyst Blog

On Apr 4, we upgraded our recommendation on Logitech International SA (LOGI - Analyst Report) to Neutral from Underperform. Our new investment thesis is supported by a Zacks Rank #3 (Hold) for the stock. However, we remain disappointed with the company’s weak third quarter fiscal 2013 results and are also concerned about the low demand for Logitech products in the EMEA (Europe, Middle East and Africa) division.

Furthermore, Logitech operates in a highly competitive market, wherein smaller, mobile computing devices, such as, tablets and smartphones with touch interfaces are increasingly gaining in popularity, while demand for desktop PCs is declining. These factors have been continuously affecting both the top- and bottom-line of the company over the past four to five quarters.

Why the Upgrade?

Recently, Logitech launched a number of new and innovative products. The new tablet accessories and gaming accessories are expected to benefit the company in the long run. Given the current trend towards smart phones and tablets, Logitech intends to tap this high potential market through its range of accessories. In the last reported quarter (3Q13), tablet accessories was also the best-performing retail product category, with sales increasing a robust 119.2% year over year to $39.4 million.

In addition, the company’s cost-cutting initiatives are expected to benefit Logitech, saving approximately $12 million to $14 million in the fourth quarter of fiscal 2013. These savings will be primarily induced from employee retrenchments of 140 employees, or 5% of its workforce as part of its cost cutting measure.

Moreover, the company is discontinuing with its non-profitable products and businesses. The company divested its remote control and digital video security categories with further plans to discontinue other non-profitable products, such as speaker docks and console gaming peripherals by the end of 2013.

Stocks That Warrant a Look

While we expect Logitech to perform in line with its peers and industry levels in the coming months and advice investors to wait for a better entry point before accumulating shares, we are bullish for Synaptics Inc. (SYNA - Snapshot Report) carrying a Zacks Rank #1(Strong Buy). Other companies like Alps Electric Co. Ltd. (APELY) and Analogic Corporation (ALOG - Snapshot Report) also have good buying opportunities. These computer and peripheral equipment companies with a Zacks Rank #2 (Buy) have the potential to rise significantly from the current levels.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%