Logitech is poised to be a long-term winner in consumer hardware, making now a good time for investors to buy according to Barclays.
The bank on Wednesday initiated coverage of the company with an overweight rating and price target of $65. That implies upside of more than 19%.
The firm sees Logitech as "the most underappreciated player in the space, with easier compares and a replacement cycle on the horizon led by gaming," analyst Tim Long wrote in a Nov. 9 note.
"LOGI has successfully transitioned from a mono-brand with PC dependency to a multi-brand and multi-category cloud peripherals company under the best of breed CEO Bracken Darrell," Long added. "LOGI is a market leader in two-thirds of its 30 product categories."
Tailwinds abound
There are several tailwinds that could drive Logitech in the future, including attractive growth drivers in video collaboration and gaming.
The company also holds the top market share in all three verticals of its creativity and productivity segment, which is profitable. There's a positive mix shift as wireless gaming peripherals and video collaboration have above average margins.
Logitech has "tremendous" brand awareness and could capture even more share gains through design and innovation, Long wrote. There are solid tuck-in acquisition opportunities that could spur growth, and the company has a strong balance sheet and consistent capital returns, according to the note.
There's also a healthy upside to shares, making the current price an attractive entry point. Plus, there are growth catalysts in the near-term that will lift shares, such as the company's reaffirmation of its full-year 2023 guidance which indicates confidence in the upcoming holiday quarter, which is expected to account for one-third of full-year profits.
Potential downside
To be sure, there are potential catalysts that could weigh on shares and make Barclays call incorrect.
The upcoming macroeconomic backdrop could hit consumer confidence and spending. In addition, the company does face increased competition in the consumer hardware space and could see its market share eroded due to a lack of production innovation.
"We think these risks are well understood and baked into the shares already," Long wrote.
— CNBC's Michael Bloom contributed reporting
