LOGI +6.55%Mar. 24, 2022 8:19 AM ETLogitech International (NASDAQ:LOGI) shares rose on Thursday after Bank of America initiated coverage on the electronics peripherals company, saying it sees 40% upside in the stock.
Analyst Adam Angelov started Logitech with a buy rating and a $107 price target, noting that the company's management has a "strong track record of execution," its return on invested capital is at 34% and there are likely further market share gains to come.
Logitech is also likely to capitalize on a "secular megatrend," where social media, gaming and video calling provide growth drivers for updated peripherals, with higher-priced products coming over time.
"Logitech is trading at 9.5x FY24E [enterprise value/EBITDA] vs. its 10yr median of 14x and below its 10-year average trough multiple of 10.8x, suggesting to us that the market sees the COVID growth phase of FY21-22 as a one-off and fears a reset of expectations," Angelov wrote in a note to clients.
Logitech (LOGI) shares rose nearly 4% to $74.60 in premarket trading on Thursday.
In addition, Angelov noted that Logitech (LOGI) has a 5% free cash flow yield, in line with its 10-year median.
Although Logitech (LOGI) has outperformed the STOXX Europe 600, the Swiss Market Index and the NASDAQ over the long term, it underperformed these three indices by 40% to 50% from June to November 2021, Angelov pointed out.
"Given largely unchanged consensus revenue/EBITDA/EPS, we think that buy-side expectations could be below sell-side," the analyst wrote, adding that in-line results or confirming previous guidance "could be viewed as a positive catalyst for the stock."
Earlier this month, Logitech International (LOGI) confirmed its 2022 outlook of 2% to 5% sales growth in constant currency, and $850 million to $900 million in non-GAAP operating income.
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