Logitech's new chief executive has her work cut out for her. Hanneke Faber took the reins of the PC and mobile device peripherals maker on Dec. 1 amid a prolonged sales slump. Now Logitech stock investors are keen to see how Faber can turn around the storied firm.
In the December quarter, Logitech's sales shrank for the ninth consecutive quarter on a year-over-year basis. The Lausanne, Switzerland-based company is suffering a hangover from the Covid pandemic when there was a boom in purchases from the work-from-home and school-at-home trends.
"Our return to growth is a question of 'when,' not 'if,'" Faber said in a letter to shareholders. "Although the uncertain environment makes the 'when' difficult to determine."
In an interview with Investor's Business Daily after the company's fiscal third-quarter report Tuesday, Haber struck an optimistic tone about Logitech's long-term prospects, as she highlighted the company's product innovation and operational discipline.
But the short-term outlook is clouded by guarded consumer spending and tight corporate tech budgets, she said.
Analysts See Sales Rising Next Quarter
"There's quite a few headwinds," Faber told IBD. "Will we return to growth? Absolutely. When exactly? We're just a little cautious on that."
Analysts polled by FactSet predict Logitech's sales will dip a fraction in the March quarter before turning positive in the June quarter.
"Inflation is a little stickier than people would have thought, which affects consumer confidence and consumer purchasing power," Faber said. "And then you have corporate IT budgets, which haven't snapped back to where they were a few years ago."
She noted that office vacancy rates in the U.S. are at a record high of 20%. "And an empty office doesn't buy any videoconferencing equipment," Faber said.
Secular Growth Trends For Logitech Stock
Factors in Logitech's favor are secular growth trends including hybrid work, videoconferencing, gaming and content creation.
Artificial intelligence technology also could give the company and Logitech stock a boost.
For instance, Logitech's new Zone Wireless 2 business headset uses AI to deliver two-way, ambient noise-canceling technology. So, the headset can cancel out the background noise on your end of the call and on the other person's side.
"That's pretty unique," Faber said. "Again, that's AI technology right into our products. And there's a lot more that we can do going forward."
PC Sales Turn Positive
Plus, personal computer sales are starting to grow again. Global PC shipments rose 0.3% year over year in the fourth quarter, following eight straight quarters of decline, research firm Gartner said.
"That's encouraging because it hadn't grown in a long time," Faber said. "That could be a tailwind for us in the year ahead."
A driver for PC sales in 2024 could be the introduction of AI PCs using new processors from AMD and Intel and software upgrades from Microsoft. Windows PC keyboards are adding a Microsoft Copilot button to quickly access the AI assistant software.
Faber noted that Logitech's latest keyboards already have a customizable button for "smart actions." The button allows users to automate repetitive tasks or access frequent actions with one keystroke.
"The most popular smart action in that last few months is 'reply with ChatGPT' by like 9X vs. the next action," Faber said. ChatGPT is the AI-power chatbot from OpenAI that kicked off the artificial intelligence craze in late 2022.
Analysts Taking Wait-And-See Approach
Faber joined Logitech from Unilever, where she led their $14 billion nutrition business as group president. Before that, she worked for Ahold Delhaize and Procter & Gamble.
Wall Street analysts are mixed on Logitech stock for now.
On Thursday, Loop Capital analyst Ananda Baruah reiterated his hold rating on Logitech stock with a price target of 87. Wall Street is waiting to see what direction Logitech's new leadership will take, he said in a client note.
On the stock market today, Logitech stock rose 0.4% to to close at 85.57.
On the company's conference call with analysts Tuesday, executives spoke of returning to pre-Covid revenue growth of 8% to 10%. But the mix of organic growth vs. acquisitions remains to be seen, Baruah said.
Logitech Stock Gets Price-Target Hikes
Wedbush Securities analyst Alicia Reese also is neutral on Logitech stock post-earnings. However, she did raise her price target on the stock to 92 from 90.
"After significant pandemic-era expansion, macroeconomic headwinds and currency pressure halted Logitech's growth trajectory," Reese said in a client note.
But Logitech is well-positioned to benefit from a global rebound in gaming sales as well as from "an overextended PC peripheral refresh cycle," she said.
Other analysts are more positive on Logitech stock.
Barclays analyst George Wang said Logitech likely is being conservative with its guidance.
"We think forward estimates are conservative as demand has stabilized or slightly improved across the board with gaming growth on the horizon," Wang said in a client note. He maintained his overweight, or buy, rating on Logitech stock and upped his price target to 104 from 96.
The next major catalyst for Logitech stock could be the company's analyst day event in May.
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