It’s time to move to the sidelines on Logitech as it deals with greater competition, UBS said. Analyst Joern Iffert downgraded shares to neutral from buy, saying the Swiss-American computer peripherals company will have to navigate several challenging quarters amid rising inflation and a weaker consumer. Along with the downgrade, the analyst lowered his price target to CHF57 from CHF66. The new target implies upside of 9% over the next 12 months. Iffert also reduced 2024 and 2025 per-share earnings estimates by 10% and 11%, respectively. “We did various industry analysis and expert calls and conclude the environment for Logitech is getting incrementally tougher,” Iffert said to clients in a Tuesday note. “Cost savings will be supportive to earnings growth but Logitech is operating in a low barrier to entry hardware end market and it is key to have some visibility on top line growth, something we miss right now,” Iffert added. The analyst outlined several reasons for the downgrade, including a tougher macro for hardware and software firms. Iffert cited recent layoffs at Logitech’s competitors Dell and Zoom , as well as the recent reopening in China that could mean lower demand for gaming. The analyst expects Logitech’s sales growth will turn positive in calendar year 2024. “[Despite] decreasing sales, we think earnings can be robust in FY 24E. But Logitech`s hardware end markets have low barriers to entry and technology migration can be a risk,” Iffert wrote. Meanwhile, the analyst forecasts competition from larger consumer and tech companies will grow in the medium term, such as from Apple or Meta. Logitech U.S.-listed shares are down 12% this year, worse than the S & P 500’s 4% fall. The computer peripherals stock fell nearly 1% in premarket trading. —CNBC’s Michael Bloom contributed to this report.
Read More: UBS downgrades Logitech, cites rising competition for the computer peripherals maker
