Logitech International


LOGI

shares have plunged 26.1% year to date (YTD), making it one of the most beaten-down stocks in the broader market sell-off witnessed by the U.S. equity market in 2022. Shares of the company underperformed the

Zacks Computer – Peripheral Equipment

industry and the S&P 500 Index in the YTD period.

Though the majority of the U.S. stock indices are in the negative territory YTD, the major concern for Logitech is softening demand for computer peripherals and accessories. In

second-quarter

fiscal 2023, the company registered a sales decline across the majority of its key product categories. With the reopening of economies and offices in the post-pandemic era, there has been an unanticipated shift in consumer buying patterns across the globe. The declining popularity of desktop PCs amid a rising trend for smaller, mobile computing devices, which feature touch interfaces, poses a threat to the company. Revenues from PC Webcams, Tablets and Other Accessories were down 36.3% and 32.9% year over year, respectively, in the last reported quarter.

Beside these, Logitech is prone to the negative impacts of currency translation, as the company derives the highest portion of its revenues from outside the Americas. On top of that, adverse currency impacts, the ongoing political tensions between Russia and Ukraine, and inflationary pressure are posing risks for the company.

Considering the current macroeconomic challenges, the company, during its second-quarter fiscal 2023 results, kept its fiscal 2023 guidance unchanged. Logitech expects fiscal 2023 revenues to decline 4-8% in constant currency. It anticipates a non-GAAP operating income of $650-$750 million.

Increased promotional spending, higher investment in retail point-of-sale marketing and industry-wide elevated component costs are likely to lower Logitech’s margins and profits in the next few months. It is, therefore, advisable to stay away from this Zacks Rank #5 (Strong Sell) stock in the near term.

3 Better Bets Than Logitech

Though Logitech’s prospects might not appear appealing at the moment, there are several stocks in the technology sector that offer good investment opportunities right now. These stocks have a favorable combination of a

Growth Score

of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). Also, these stocks have outperformed the

Zacks Computer and Technology

sector on a YTD basis.

You can see


the complete list of today’s Zacks #1 Rank stocks here


.

Per the Zacks proprietary methodology, stocks with this favorable combination offer good investment opportunities.

eGain Corporation


EGAN

is the leading provider of cloud customer engagement hub software. With a presence in North America, EMEA and the APAC, the Zacks Rank #1 company offers web customer interaction applications, social customer interaction applications and contact center applications.

eGain solutions help improve customer experience, optimize service processes, and boost sales across the web, social and phone channels. Hundreds of the world’s largest companies rely on eGain to transform their fragmented sales engagement and customer service operations into unified customer engagement hubs. In the first-quarter fiscal 2023, the company’s Knowledge Hub solution was adopted by some major global clients, which include a leading global airline, a U.S.-based health and benefits service provider, and the Department of Taxation of one of the U.S. state governments.

EGAN has a Growth Score of B. The Zacks Consensus Estimate for EGAN’s second-quarter fiscal 2023 earnings is pegged at 4 cents, which has been unchanged in the past 30 days. The consensus mark for fiscal 2023 earnings of eGain moved up by 5 cents over the past 60 days to 19 cents.

Fortinet


FTNT

is benefiting from the increased adoption of its networking and security platforms, driven by a rise in the hybrid working policy among top-notch companies. The Zacks Rank #2 company continues to win back-to-back deals for offering unique cyber safety solutions, which ensure the blocking of attacks or malicious content. Its Fortinet Security Fabric, cloud and Software-defined Wide Area Network (SD-WAN) offerings are witnessing robust growth.

The growing adoption of SD-WAN solutions is a key growth driver for Fortinet in the long run. According to the latest

MarketsAndMarkets

report, the market size for SD-WAN solutions is likely to reach $13.7 billion by 2027 from $3.4 billion in 2022, indicating seeing a CAGR of 31.9% during 2022-2027. As only a few vendors offer security and SD-WAN solutions, Fortinet is well-positioned to capitalize on the increasing opportunities in the market.

Fortinet has a Growth Score of A. The Zacks Consensus Estimate for the company’s fourth-quarter 2022 earnings is pegged at 39 cents per share, indicating 56% year-over-year growth. The figure moved up 4 cents over the past 60 days. The consensus mark for FTNT’s 2022 earnings is pegged at $1.15 per share, having moved north by 10 cents in the past 60 days and suggesting 43.8% year-over-year growth. Long-term estimated earnings growth for the company is pegged at 18%, higher than the industry average of 14.5%.

Microchip Technology


MCHP

develops and manufactures microcontrollers, memory, and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. It is one of the fastest-growing providers of 8-bit, 16-bit and 32-bit microcontrollers in the world.

Microchip’s microcontroller business continues to outperform the industry, enabling it to gain a significant market share. The company is increasingly expanding its touch business beyond handsets and tablets in areas such as automotive and industrial applications. Its Analog business is one of the largest analog franchises in the market. This Zacks Rank #2 company continues to develop and introduce a wide range of innovative and proprietary new linear, mixed-signal, power, interface, and timing products to fuel growth of the analog business. To further capitalize on this burgeoning business potential, MCHP is developing and introducing a wide range of innovative and proprietary products.

Microchip has a Growth Score of B. The Zacks Consensus Estimate for the company’s third-quarter fiscal 2023 earnings is pegged at $1.55 per share, moving northward by 9 cents in the past 30 days. Earnings estimates suggest 29.2% year-over-year growth. The consensus mark for fiscal 2023 earnings is pegged at $5.94, which has moved up 4.2% over the past 60 days and indicates 28.9% year-over-year growth. Long-term estimated earnings growth for the company is pegged at 16.3%.

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