Computer - Peripheral Equipment industry is showing signs of struggle as the demand for remote work and learning is declining, with the vaccine availability helping economies to open up. As people stay less at homes, the time spent on playing video games is also expected to drop, thereby hurting demand for the gaming accessories. Nevertheless, Logitech ( LOGI Quick Quote LOGI - Free Report) , LG Display ( LPL Quick Quote LPL - Free Report) , Mercury Systems ( MRCY Quick Quote MRCY - Free Report) and Stratasys ( SSYS Quick Quote SSYS - Free Report) are a few industry participants well poised to benefit from the growing demand for professional gaming accessories, PC peripherals, touchscreen devices, smart glasses and RFID solutions. Moreover, the solid demand for 3D-printed health equipment like face shields, nasal swabs and ventilator parts has been a tailwind. Industry Description
The Zacks Computer - Peripheral Equipment industry comprises companies offering computer input, output and storage devices. These include keyboards, mouse, LCD panels, smart glass, analog to digital imaging solutions, touch sensors, 3D printers & additive manufacturing, and transaction-based printer products, among others. Moreover, video gaming accessories, including gaming mouse, wired gaming headset, in-ear gaming headphone, controllers for Xbox One and Playstation, are offered by these companies. Notably, the highly competitive nature of the industry is encouraging participants to come up with innovative and relevant products to meet the current demand trend. This is strengthening their product portfolios.
3 Trends Shaping the Future of the Computer- Peripheral Equipment Industry
The computer peripheral equipment industry is steadily overcoming the operational challenges posed by the coronavirus pandemic. The companies are in the process of restarting and arranging their operations according to the new normal. However, the completion of Microsoft Production and Demand on the Road to Recovery: ’s Windows 10 replacement cycle is likely to keep denting demand for computer peripherals, as the industry is dependent on the PC market to a major extent. The gradual shift in consumer preference from mobile gaming to a more professional gaming experience is a major growth driver. The launch of advanced gaming devices and the rising popularity of e-sports leagues are likely to boost the prospects. Markedly, e-sports will also likely continue aiding the total addressable market in the gaming peripherals industry. In addition, the 3D printing market presents a favorable long-term investment opportunity, as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for primary designing and product modeling. Also, the coronavirus outbreak is resulting in massive demand for gaming equipment and 3D-printed medical equipment, which is a major driving force for this industry during these trying times. Shift in Consumer Preference a Key Catalyst:
The expansion of the total addressable market bodes well for the industry participants. A deepening penetration into the price-sensitive regions like the Asia Pacific and the Middle East & Africa through low-cost quality products boosts growth prospects. Expanding Global Footprint: Zacks Industry Rank Indicates Dim Prospects
The Zacks Computer-Peripheral Equipment industry is housed within the broader Zacks
Computer and Technology sector. It carries a Zacks Industry Rank #177, which places it at the bottom 29% of more than 250 Zacks industries.
Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Notably, a few stocks have the potential to outperform the market, based on a strong earnings outlook. But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms the S&P 500 and the Sector
The Zacks Computer-Peripheral Equipment industry has underperformed the S&P 500 composite and the broader Zacks Computer and Technology sector in the year-to-date period.
The industry has lost 14.1% during this period, while the S&P 500 and the broader sector gained 17.1% and 18.1%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, which is a commonly-used multiple for valuing computer peripheral stocks, we see that the industry is currently trading at 0.69X compared with the S&P 500’s 4.93X and the Zacks Computer and Technology sector’s 5.52X.
Over the last five years, the industry has traded as high as 1.22X, as low as 0.44X and at the median of 0.55X, as the chart below shows.
Trailing 12-Month Price-to-Sales (P/S) Ratio
4 Computer Peripheral Stocks to Keep an Eye On
Logitech – This Switzerland-based company is benefiting from the strong momentum in the video collaboration, gaming, and creativity & productivity businesses. It has been able to bank on its software and go-to-market capabilities to drive market-share gains and growth.
Apart from this, the thriving cloud-based video conferencing services will continue being the key catalyst. The stay-at-home orders due to the coronavirus outbreak are also boosting sales. The rising adoption of new mobile platforms in both mature and emerging markets is fueling demand for Logitech’s peripherals and accessories. Further, partnerships with cloud providers like Zoom Video, Microsoft and Google are major positives for this Zacks Rank #3 (Hold) company.
The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised downward by a penny to $4.66 per share over the past seven days. Logitech’s shares have been up 9.6% in the past year.
Price and Consensus: LOGI
LG Display – This Seoul, Republic of Korea-based company primarily manufactures and sells thin-film transistor liquid crystal display panels in a range of sizes and specifications primarily for use in televisions, notebook computers and desktop monitors, as well as for handheld application products, such as mobile phones; and medium and large-size panels for industrial and other applications, including entertainment systems, portable navigation devices, e-paper, digital photo displays and medical diagnostic equipment.
LG Display is riding on the healthy demand for its display panels from PC vendors. The PC vendors are witnessing heightened demand for notebooks and desktops amid the COVID-19 pandemic-induced remote-working and online-learning trends.
In addition, the travel restrictions and social-distancing measures amid the pandemic are driving demand for televisions as people need entertainment devices at their homes. The solid sales for smartphones are also likely to spur demand for the company’s display panels.
This Zacks #3 Ranked company supplies products to original equipment manufacturers and multinational corporations. The Zacks Consensus Estimate for its 2021 earnings currently stands at $2.04 per share that has remained unchanged in the past 30 days. The stock has gained 15.3% in the past year.
Price and Consensus: LPL
Mercury Systems: It is gaining from the modernization in radar, electronic warfare and C4I, opening up new opportunities in weapon systems, space, avionics processing, and mission computing, and embedded rugged service for the company. The company’s domain expertise in analog and digital integration has helped it build a solid long-term relationship with the prime defense contractors.
Additionally, Mercury Systems’ embedded computing servers, including the suite of EnsembleSeries blades, have delivered processing solutions with long lifecycles, high performance, environmental resiliency, interoperability and SWaP optimization for 35 years. Also, the fast-growing usage of parallel processing and high performance computing (HPC) is prompting companies like Mercury Systems to capitalize on artificial intelligence (AI) for solving real-world problems across industries.
This Andover, MA-based company carries a Zacks Rank of 3, at present. The Zacks Consensus Estimate for the fiscal 2022 earnings has been revised upward by a penny in the last seven days to $2.49 per share.
Price and Consensus: MRCY
Stratasys: This Eden Prairie, MN-based company is benefiting from the increase in demand for 3D printed medical equipment. Notably, the adoption of PolyJet and FDM printers has been encouraging. Markedly, Stratasys’ machines facilitate prototyping within a few hours, which reduces the development time and upfront costs. Also, the company’s spool-based system compares favorably with the UV polymer systems. For these reasons, we think the company maintains a leading position in RP machines. Apart from these, the company’s RedEye RPM is the world's largest RP and part-building service.
Furthermore, this Zacks Rank #3 3D printing company has made strategic partnerships with the likes of Schneider Electric, Boeing, Ford Motor, Siemens, Boom Supersonic and United Launch Alliance in recent times. These collaborations are aimed at introducing advanced 3D printing technologies to the aerospace and automotive industries. Additionally, the company’s cost-control initiatives are anticipated to reflect positively on the bottom line.
The consensus mark for 2021 loss has been stable at 23 cents per share for the past 30 days. The stock has appreciated 72.6% in a year’s time.
Price and Consensus: SSYS