JPMorgan: Logitech Is Trading Near Its Fair Value

Logitech International SA (USA) LOGI shares are likely to underperform the mean of JPMorgan's coverage universe over the next six-to-12 months, an analyst at the firm said.

The Analyst

JPMorgan analyst Paul Coster downgraded shares of Logitech from Neutral to Underweight and lowered the price target from $43 to $40.

The Thesis

Logitech shares are trading close to the stock's fair value, tilting the risk-reward slightly negative, Coster said in a Tuesday  note. The analyst said he does not consider Logitech a good stock to short.

JPMorgan still expects the company to conclude fiscal year 2018 with pro forma earnings per share of $1.55 on sales of $2.56 billion. This compares to consensus estimates that call for earnings of $1.54 on sales of $2.53 billion. JPMorgan's 2019 estimates for the company are also above Street forecasts, Coster said.

"We look for LOGI to generate a three-year EPS CAGR of about 12 percent on sales growth of about 10 percent, assuming slight pressure on gross margins offsets modest operating leverage," the analyst said. 

JPMorgan views the company's March 6 analyst day as a possible catalyst.

"There is risk to our Underweight given proximity to the firm's analyst day," Coster said. "That said, we don't see much room in this already-efficient business model for an upside surprise, and we don't think management is motivated to raise forward revenue growth expectations above consensus." 

The Price Action

Logitech shares are up about 19 percent over the past year.

At the time of publication, Logitech shares were down 0.56 percent at $39.39. 

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Logitech MX Sound Bluetooth speakers. Courtesy photo.