Computer-Peripheral Equipment industry players like Logitech ( LOGI Quick Quote LOGI - Free Report) , LG Display ( LPL Quick Quote LPL - Free Report) and TransAct Technologies ( TACT Quick Quote TACT - Free Report) are well-poised to benefit from the growing demand for professional gaming accessories, touchscreen and wireless devices, smart glasses and RFID (Radio Frequency Identification) solutions. Moreover, the solid demand for 3D-printed health equipment like face shields, nasal swabs and ventilator parts has been a tailwind. However, the industry has been suffering from macroeconomic headwinds, including inflationary pressures and higher interest rates. These have induced sluggishness in IT spending, affecting the demand for computer peripherals. The industry is also showing signs of struggle as demand for remote working and online learning-related computer peripherals is declining with the post-pandemic reopening of economies. Industry Description
The Zacks Computer-Peripheral Equipment industry comprises companies offering computer input, output and storage devices. These include keyboards, mice, 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 mice, wired gaming headsets, in-ear gaming headphones, and controllers for Xbox One and PlayStation are offered by these companies. 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.
4 Trends Shaping the Future of the Computer-Peripheral Equipment Industry
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 prospects. Markedly, e-sports will also likely continue aiding the total addressable market in the gaming peripheral 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 COVID-19 outbreak has resulted in massive demand for gaming equipment and 3D-printed medical equipment, which has been a major driving force for this industry during such trying times. A Shift in Consumer Preference Is a Key Catalyst: The expansion of the total addressable market bodes well for the industry participants. Deepening penetration into price-sensitive regions like the Asia Pacific and the Middle East & Africa through low-cost quality products boosts growth prospects. Expanding Global Footprint: Rising interest rates and inflationary pressures are hurting consumer spending. Meanwhile, enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for the Computer-Peripheral Equipment market’s prospects in the near term. Macroeconomic Headwinds Might Hurt IT Spending:
To survive in the highly competitive computer peripheral market, each player is aggressively investing in research and development to enhance their product portfolio and broaden their capabilities. Moreover, companies are looking to improve their sales and marketing capabilities, particularly by increasing their sales force. Therefore, elevated operating expenses to capture more market share are likely to dent margins in the near term. Elevated Operating Expenses to Hurt Profitability: Zacks Industry Rank Indicates Bright Prospects
The Zacks Computer-Peripheral Equipment industry is housed within the broader Zacks
Computer and Technology sector. It carries a Zacks Industry Rank #27, which places it in the top 11% of more than 250 Zacks industries.
Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Apr 30, 2023, the industry’s earnings estimates for the current year have increased 15%.
Given the bright industry outlook, a number of stocks are worth watching. However, before we present the stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags the Sector & the S&P 500
The Zacks Computer-Peripheral Equipment industry has underperformed the S&P 500 composite and the broader Zacks Computer and Technology sector in the trailing 12 months.
The industry has climbed 6.8% during this period. The S&P 500 and the broader sector have increased 12.2% and 33%, respectively, over the same time frame.
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 0.84X compared with the S&P 500’s 3.83X and the Zacks Computer and Technology sector’s 4.51X.
Over the last five years, the industry has traded as high as 1.22X, as low as 0.33X and at the median of 0.63X, as the chart below shows.
Trailing 12-Month Price-to-Sales (P/S) Ratio
3 Stocks to Buy
Logitech: It is a global leader in peripherals for personal computers and other digital platforms. This Zacks Rank #2 (Buy) company develops and markets innovative products in PC navigation, Internet communications, digital music, home entertainment control, video security, interactive gaming and wireless devices.
Logitech’s stronger-than-expected results for the second quarter of fiscal 2024 have boosted confidence about its recovery from the post-pandemic downturn. Heightening hybrid work trends are likely to boost demand for the company’s video collaboration, keyboards & combos and pointing device tools. Thriving cloud-based video conferencing services continue to be the key catalyst. The rising adoption of new mobile platforms in both mature and emerging markets will fuel demand for its peripherals and accessories. Its partnerships with cloud providers like Zoom Video, Microsoft and Google are major upsides.
The Zacks Consensus Estimate for fiscal 2024 earnings has been revised upward by 11 cents in the past 30 days to $3.43 per share. The stock has appreciated 39.6% in a 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 commercial notebooks and desktops as economies worldwide are reopening, and enterprises are investing in building a hybrid work environment. The solid sales of smartphones are also likely to spur demand for this Zacks Rank #2 company’s display panels.
The company supplies products to original equipment manufacturers and multinational corporations. The Zacks Consensus Estimate for its 2023 bottom line is pegged at a loss of $2.97 per share, 17 cents narrower than a loss of $3.14 per share projected 60 days ago. The stock has declined 15.9% in the past year.
Price and Consensus: LPL
TransAct Technologies: This Zacks Rank #2 company offers software-driven technology and printing solutions for high-growth markets, including food service technology, point-of-sale automation and casino and gaming.
TransAct is benefiting from the growing demand for its products and services amid accelerated digital transformation and business automation across organizations. The company's printers are trusted worldwide to provide crisp, clean transaction records from receipts, tickets and coupons, register journals and other documents. TransAct benefits from higher sales of AccuDate 9700 products. It also added 710 net new BOHA! terminals in the third quarter of 2023, bringing the total number of online terminals in the market to 13,795.
The Zacks Consensus Estimate for TACT’s 2023 earnings has increased 45% to 45 cents per share over the past 30 days. Its shares have returned 9.8% in the trailing 12 months.
Price and Consensus: TACT