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.
Notably, the highly competitive nature of the industry is encouraging the participants to come up with innovative and relevant products to meet the current demand trend. This is strengthening their product portfolios.
Here are the three major themes in the industry:
- The gradual shift in consumer preference from mobile gaming to a more professional gaming experience is a major growth driver. Launch of advanced gaming devices and growing popularity of e-sports leagues are expected to boost this industry further. Going forward, e-sports is also likely to continue driving the total addressable market in the gaming peripherals industry. Moreover, 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. A report by MarketsandMarkets revealed that the global 3D printing industry is expected to reach $34.8 billion by 2024.
- Expanding the total addressable market bodes well for the industry participants. Improving penetration into price-sensitive regions like the Asia Pacific and the Middle East & Africa through low-cost quality products enhances prospects. However, uncertainty surrounding the U.S.-China trade war makes us anxious about the near-term prospects of the industry.
- However, lockdown measures to contain the spread of coronavirus have caused massive delays in productions and logistic issues, resulting in a fall in global PC shipments. The worldwide PC shipments fell 8% year over year in the first quarter of 2020, according to the data compiled by research firm Canalys. Per its latest report PC shipments fell despite a demand surge in the March-end quarter due to the shift to the work-and-learn-from-home trend amid the coronavirus-led global lockdown. Moreover, the passage of Microsoft (MSFT - Free Report) Windows 10 replacement cycle in January 2020 is an overhang on demand from the business circle, thereby making us apprehensive about the computer peripheral industry, which is dependent on the PC market to some extent.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Computer Peripheral Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #68, which places it at the top 27% of 253 Zacks industries.
The group’s Zacks Industry Rank, which is basically 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 outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stockmarket performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Computer Peripheral Equipment industry has underperformed the Zacks S&P 500 composite and its own sector in the past year.
The stocks in this industry have collectively lost 2.7% compared with the Zacks Computer and Technology sector’s rally of 8%, and the S&P 500’s decline of 0.8%.
One Year Price Performance
Industry’s Current Valuation
Comparing the industry with the Zacks S&P 500 composite on the basis of price-to-sales ratio (P/S), which is a commonly used multiple for valuing computer peripheral stocks, we see that the industry’s ratio of 0.57 is lower than the S&P 500’s 3.08 and the sector’s 3.86.
Over the last five years, the industry has traded as high as 0.67X, as low as 0.07X and recorded a median of 0.52X, as the charts below show.
Price-to-Sales Ratio (TTM)
Price-to-Sales Ratio (TTM)
Growing demand for professional gaming equipment and 3D printing and additive manufacturing instruments should drive the industry. However, unpredictable long-term prospects of the PC market pose a concern.
Additionally, the emergence of the coronavirus pandemic has disrupted global supply chains and destabilized international trade.
Below are three stocks that carry either a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Switzerland-based Logitech International S.A. (LOGI - Free Report) designs, manufactures and markets innovative peripherals like Internet video cameras, mouse and trackballs, keyboards, audio and telephony products, and interactive gaming devices and 3D controllers. The Zacks Consensus Estimate for fiscal 2020 earnings has increased 0.5% over the past 30 days to $2.10 per share. The company currently carries a Zacks Rank #1.
Based in San Jose, CA, Immersion Corporation (IMMR - Free Report) develops hardware and software technologies that enable users to interact with computers using the sense of touch. Their patented technologies, which are branded TouchSense, enable devices such as mouse, joysticks, knobs and medical simulation products to deliver tactile sensations that correspond to on-screen events. The Zacks Consensus Estimate for 2020 loss has been stable at 12 cents per share over the past 30 days for this Zacks Rank #2 stock.
Andover, MA-based Mercury Systems Inc. (MRCY - Free Report) is a commercial provider of secure sensor and mission processing subsystems for defense and intelligence programs. The stock carries a Zacks Rank #2. The Zacks Consensus Estimate for fiscal 2020 earnings has increased 1.9% over the past 30 days, reaching $2.16 per share.