Chicago, IL – January 22, 2025 – Today, Zacks Equity Research Equity are Logitech International LOGI, Mercury Systems MRCY, Stratasys SSYS and TransAct Technologies TACT.
Link: https://www.zacks.com/commentary/2400317/4-computer-peripheral-stocks-to-watch-amid-industry-woes
The Zacks Computer-Peripheral Equipment industry suffers from weakening IT spending in an uncertain macroeconomic environment. Protracted inflationary conditions, still-high interest rates and geopolitical risks 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 has declined in the post-pandemic era.
Also, the PC refreshment cycle for the installed base during the pandemic is yet to come, hurting the demand for PCs and peripherals. Nevertheless, Logitech International, Mercury Systems, Stratasys and TransAct Technologies are well-poised to benefit from the growing demand for professional gaming accessories and rising usage of transaction-based printers and related products. Moreover, increasing government spending on modernizing radar and electronic warfare systems has been a tailwind. Moreover, the solid demand for 3D-printed health equipment, aerospace and automotive parts has been an upside.
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.
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 growing usage of advanced 3D technologies across multiple industries, including medical, aerospace and automotive, is a major driving force for this industry.
Expanding Global Footprint: 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.
Macroeconomic Headwinds Might Hurt IT Spending: Still-high interest rates and protracted inflationary conditions are hurting consumer spending. On the other hand, 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.
Delayed PC Refresh Cycle Impacts Demand for Computer Peripherals: The lack of a need for product refreshes is expected to negatively impact the demand for computer peripheral products in the near term. The majority of the global working population refreshed PCs and related peripheral products about two to three years ago in the wake of the pandemic-led work-from-home trend.
Elevated Operating Expenses to Hurt Profitability: 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. Elevated operating expenses to capture more market share are likely to dent margins in the near term.
The Zacks Computer-Peripheral Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #157, which places it in the bottom 37% of more than 250 Zacks industries.
The group’s 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 outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential.
Despite the gloomy industry outlook, a few stocks are worth buying. But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation.
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 plunged 30.4% during this period. The S&P 500 and the broader sector have risen 24.7% and 27.7%, respectively, over the same time frame.
Based on the forward 12-month P/S, which is a commonly used multiple for valuing computer peripheral stocks, we see that the industry is currently trading at 0.68X compared with the S&P 500’s 5.46X and the Zacks Computer and Technology sector’s 7.02X.
Over the last five years, the industry has traded as high as 4.73X, as low as 0.23X and at the median of 0.66X.
Stratasys: It is a manufacturer of in-office rapid prototyping and manufacturing systems and 3D printers for automotive, aerospace, defense, electronic, medical, education and consumer product original equipment manufacturers (OEMs).
Stratasys is benefiting from an increase in demand for 3D printed equipment across several industries. Its machines facilitate prototyping within a few hours, which reduces development time and upfront costs. Also, this Zacks Rank #2 (Buy) company’s spool-based system compares favorably with UV polymer systems. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SSYS’ cost-control initiatives are expected to aid bottom-line growth. Stratasys’ firm focus on introducing innovative products is helping it win new deals. Strategic partnerships have helped the company develop advanced 3D printing technologies for multiple industries, including aerospace and automotive, expanding its geographic reach and driving market penetration.
The consensus mark for 2025 earnings has remained unchanged over the past 60 days at 33 cents per share. The stock has depreciated 35.6% in a year.
Mercury Systems: It is one of the world’s leading providers of sensor and safety-critical mission processing subsystems. The company’s products and solutions are used for various critical aerospace, defense, commercial aviation and intelligence programs.
Mercury Systems is benefiting from modernization in radar, electronic warfare and C4I, which is providing it with new opportunities in weapon systems, space, avionics processing, mission computing and embedded rugged services. Domain expertise in analog and digital integration has helped it build a solid long-term relationship with defense prime contractors.
The Zacks Consensus Estimate for this Zacks Rank #2 company’s fiscal 2025 earnings has been revised upward by 9 cents to 31 cents per share over the past 60 days. MRCY stock has soared 36.2% in the past 12 months.
Logitech: It is a global leader in peripherals for personal computers and other digital platforms. The 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 back-to-back strong quarterly results have boosted investors’ confidence in its recovery from the post-pandemic downturn. The latest reported results for the second quarter of fiscal 2025 marked the third consecutive quarter of year-over-year sales growth after two and a half years of downturn post the pandemic-driven boom.
Increasing hybrid work trends are likely to boost demand for its video collaboration, keyboards & combos and pointing device tools. Thriving cloud-based video conferencing services continue to be its key catalyst. The rising adoption of new mobile platforms in both mature and emerging markets should fuel the demand for its peripherals and accessories. Its partnerships with cloud providers like Zoom Video and Microsoft are major upsides.
The Zacks Consensus Estimate for fiscal 2025 earnings has remained unchanged in the past 60 days at $4.63 per share. Shares of this Zacks Rank #3 (Hold) company have declined 9.1% over the past year.
TransAct Technologies: The company designs, develops, manufactures and markets transaction-based printers and related products under the ITHACA, MAGNETEC and TRANSACT.COM brand names. This Zacks Rank #3 company focuses on five vertical markets — point-of-sale, gaming and lottery, financial services, kiosks and the Internet.
TransAct Technologies 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.
The Zacks Consensus Estimate for the 2025 bottom line has remained unchanged over the past 60 days at a loss of 17 cents per share. The stock has plunged 41.7% over the past year.
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Logitech International S.A. (LOGI) : Free Stock Analysis Report
Stratasys, Ltd. (SSYS) : Free Stock Analysis Report
TransAct Technologies Incorporated (TACT) : Free Stock Analysis Report
Mercury Systems Inc (MRCY) : Free Stock Analysis Report
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