Deutsche Bank downgrades Logitech, says computer and video businesses won't fare well in tough economy

Published Fri, Jan 13 20237:57 AM EST

Logitech 's stock should fall tougher economic conditions hit personal computer and video spending, Deutsche Bank said Friday. Analyst George Brown downgraded the stock to hold from buy. Brown also lowered his price target by CHF14 to CHF54, which presents a downside of 4.7% over Thursday's close. The previous price target implied the stock would have gained 20%. "We are turning more cautious on Logitech, as the current downturn in the PC market and weakening demand seems to be more severe than anticipated," Brown said in a note to clients. U.S.-listed shares fell 5% in premarket trading Friday. The stock is down nearly 9% so far in 2023, even as the broader market has turned up to start the year. Logitech pre-released fiscal third-quarter results that showed a 9% miss to top-line expectations. The company said it expects a wider sales decline than previously anticipated, while also cutting its non-GAAP operating income target by 15%. And he doesn't just expect challenges in 2023. Brown also trimmed the fourth-quarter non-GAAP operating income estimate by 15% from his prior forecast for the 2024 fiscal year. That comes amid broader concerns for the personal technology industry as consumers have increasingly reconsidered big-ticket purchases amid inflationary pressures. Industry research data IDC's PC tracker showed personal computer shipments were down 28% in the fourth quarter of 2022 compared with the same period a year prior. To be sure, Logitech sales have a historically low correlation to personal computer shipments, but Brown warned the correlation is growing stronger as the broader economic worsens. Brown said he's more cautious on its video collaboration market, which he said has missed expectations so far despite its contribution to long-term growth targets. He said the product may fall out of favor as business further cut spending. Meanwhile, the company noted continued challenges in production due to new Covid outbreaks in China. — CNBC's Michael Bloom contributed to this report.