UBS has issued a report on Logitech (NASDAQ:) International SA (SWX: LOGN), maintaining a 12-month ‘Sell’ rating and setting a target price of CHF65.00.
The analysis highlighted the importance of pricing as an indicator of consumer demand and margins for Logitech’s products.
The company tracked the price trends of key Logitech items sold on Amazon (NASDAQ:) in the United States, which represents approximately 25-30% of Logitech’s group sales. These products mainly come from divisions that contribute more than 95% of profits: gaming, PC peripherals and videoconferencing.
Despite recent increases in average selling prices (ASP) of 10-15% aimed at offsetting inflation, lower input costs have not yet been reflected in consumer prices within the hardware industry.
However, there are signs that this could change. Notably, Logitech has achieved the highest revenue figures among its gaming peripheral peers since the COVID period, making for challenging comparisons going forward.
Looking at specific product categories, UBS noted month-over-month declines in ASPs for Logitech’s gaming mice (-7%), keyboards (-6%) and headsets (-4%). Conversely, non-gaming categories such as PC mice saw smaller declines (-2% m/m), while ASPs for PC keyboards and video conferencing increased by +3% and +1% respectively.
This resilience in PC peripheral prices is partly attributed to Microsoft (NASDAQ:) exiting the market about nine to 12 months ago. Nevertheless, Incase’s plan to relaunch Microsoft’s PC peripherals business in the second half of 2024 could put new competitive pressure on prices.
Logitech’s guidelines recognize certain risks, but actual sell-through, which reflects end-user demand, remains critical. In the first quarter of FY25, sell-through growth was modest at +3% year-on-year, compared to a sales figure of +12%.
With a weak consumer environment in North America and potential market share losses in China, subdued sell-through is expected to continue. This could lead to Logitech expanding promotions, potentially impacting volumes and margins.
UBS also noted that investor expectations for Logitech appear optimistic, with forecasts of 17-18x EV/EBITDA for fiscal 2025E. Such high valuations imply significant upside risk to consensus estimates, which UBS suggests may not fully materialize in the next six to 12 months.
This article was produced with the support of AI and reviewed by an editor. For more information see our General Terms and Conditions.
