Analyst Prefers MobileIron Over Logitech, NETGEAR In Consumer Tech Space

Sterne Agee CRT prefers Mobileiron Inc MOBL over Logitech International SA (USA) LOGI and NetGear, Inc. NTGR, saying that tailwinds in enterprise mobility and security should drive re-acceleration for Mobileiron.

Analyst Rob Cihra initiated coverage of Mobileiron with a Buy rating and $7.50 price target, Logitech with Neutral and $18 price target, and NetGear with Neutral and $43 price target.

On MOBL, Cihra said "Although a rough ride since its 2Q14 IPO, we believe revenue growth re-accelerates 2016-18E as mixshift to recurring subscriptions ultimately flows through."

"We expect seat growth to remain strong with secular tailwinds in 1) mobility+security, 2) smartphone consumerization+BYOD and 3) enterprises only ~20% penetrated by EMM."

He added, "Execution has been choppy, including mgmt changes and shift from perpetual license toward subscriptions, but MOBL is now <1/2 its IPO price and macro tailwinds remain. As smartphones become mission-critical platforms, we think demand for enterprise mobile security just keeps growing."

Cihra projects Mobileiron to report 2016 loss of $0.39 a share and revenue of $172 million. Wall Street analysts, on average, expect a loss of $0.41 a share and revenue of $170.19 million.

On Logitech, the analyst said the company is nearly 60 percent reliant on the secularly weak PC market but sells into the installed base, so less exposed to elongating replacement cycles and short-term swings, and is growing through expansion into newer consumer electronics markets. In addition, value-added design and aggressive cost-controls support margins, the analyst wrote.

"Our only issue is the stock is not cheap, with cost-cuts perhaps getting tougher to find and PC declines still a headwind, so we await more upside to our target," Cihra noted.

"With its FY ending March, we forecast LOGI's FY17E revenue at $2.04B up +1%Y/Y but +5%Y/Y in Retail (its core and now only business ex-OEM), and EPS rebounding +16%Y/Y to $1.07. We forecast FY18 revenues +5%Y/Y and EPS +11%Y/Y," Cihra continued.

Street's consensus view for Logitech calls for earnings of $0.98 on revenue of $2.05 billion.

For NetGear, the analyst sees "solid secular demand for home broadband/WiFi as 1) PCs are joined on the network by smartphones, tablets, TVs, game consoles, etc., 2) HD video streaming sucks bandwidth and now 3) smart home/IoT devices start jumping on board with their own bandwidth needs."

Cihra also hailed NTGR's strategy to separate from commodity competition by mixing away from low-end Service Provider (SP) toward premium consumer/retail positioning supported by brand and R&D.

"But we're not sure its P/E can expand to drive near-term upside as revs decline again in 2016E on ongoing SP remix before re-accelerating in 2017E," Cihra added.

The analyst expects full year EPS of $2.69 and revenue of $1.268 billion. Street expects earnings of $2.63 a share on revenue of $1.31 billion.

According to TipRanks, Cihra has a success rate of 55 percent, with average return per recommendation of +9 percent. He is ranked 518 out of 3,842 analysts.

Shares of Mobileiron were down 1.33 percent at $4.44, while Logitech gained 0.25 percent to $15.96 and NetGear slipped 0.52 percent to $40.06.