3 Computer Peripheral Stocks to Buy From a Prospering Industry
The Zacks Computer-Peripheral Equipment industry players like Vuzix VUZI, Identiv INVE and TransAct Technologies TACT are well poised to benefit from the growing demand for professional gaming accessories, touchscreen and wireless devices, smart glasses and RFID (Radio Frequency Identification) solutions. Moreover, the solid demand for 3D-printed health equipment like face shields, nasal swabs and ventilator parts has been a tailwind. However, the industry has been suffering from macroeconomic headwinds, including inflationary pressures and higher interest rates. These have induced sluggishness in IT spending, affecting the demand for computer peripherals. The industry is also showing signs of struggle as demand for remote working and online learning-related computer peripherals is declining with the post-pandemic reopening of economies.
Industry Description
The Zacks Computer-Peripheral Equipment industry comprises companies offering computer input, output and storage devices. These include keyboards, mice, LCD panels, smart glass, analog to digital imaging solutions, touch sensors, 3D printers & additive manufacturing, and transaction-based printer products, among others. Moreover, video gaming accessories, including gaming mice, wired gaming headsets, in-ear gaming headphones, and controllers for Xbox One and PlayStation are offered by these companies. Notably, the highly competitive nature of the industry is encouraging participants to come up with innovative and relevant products to meet the current demand trend. This is strengthening their product portfolios.
4 Trends Shaping the Future of the Computer-Peripheral Equipment Industry
Shift in Consumer Preference is a Key Catalyst: The gradual shift in consumer preference from mobile gaming to a more professional gaming experience is a major growth driver. The launch of advanced gaming devices and the rising popularity of e-sports leagues are likely to boost prospects. Markedly, e-sports will also likely continue aiding the total addressable market in the gaming peripherals industry. In addition, the 3D printing market presents a favorable long-term investment opportunity, as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for primary designing and product modeling. Also, the coronavirus outbreak has resulted in massive demand for gaming equipment and 3D-printed medical equipment, which has been a major driving force for this industry during those trying times.
Expanding Global Footprint: The expansion of the total addressable market bodes well for the industry participants. Deepening penetration into price-sensitive regions like the Asia Pacific and the Middle East & Africa through low-cost quality products boosts growth prospects.
Macroeconomic Headwinds Might Hurt IT Spending: Rising interest rates and inflationary pressures are hurting consumer spending. On the other hand, enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for the Computer-Peripheral Equipment market’s prospects in the near term.
Elevated Operating Expenses to Hurt Profitability: To survive in the highly competitive computer peripheral market, each player is aggressively investing in research and development to enhance their product portfolio and broaden their capabilities. Moreover, companies are looking to improve their sales and marketing capabilities, particularly by increasing their sales force. Therefore, elevated operating expenses to capture more market share are likely to dent margins in the near term.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Computer–Peripheral Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #106, which places it in the top 42% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Apr 30, 2023, the industry’s earnings estimates for the current year have increased 15%.
Given the bright industry outlook, a number of stocks are worth watching. However, before we present the stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Computer-Peripheral Equipment industry has underperformed the S&P 500 composite and the broader Zacks Computer and Technology sector in the trailing 12 months.
The industry has climbed 2.8% during this period. The S&P 500 and the broader sector have gained 17.2% and 38.7%, respectively, over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, which is a commonly used multiple for valuing Computer Peripheral companies, we see that the industry is trading at 0.72X compared with the S&P 500’s 3.81X. It is below the sector’s trailing 12-month P/S of 4.31X.
Over the last five years, the industry has traded as high as 1.22X and as low as 0.33X, with the median being 0.60X, as the charts below show.
P/S (TTM)
3 Peripheral Stocks to Buy Right Now
Vuzix: This Zacks Rank #2 (Buy) company offers wearable display devices. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in West Henrietta, NY, Vuzix benefits from growing demand for its devices, particularly AI-enabled smart glasses. Expanding global sales channels is expected to drive top-line growth in the long haul.
The Zacks Consensus Estimate for Vuzix’s 2023 loss has been steady at 58 cents per share over the past 30 days. Its shares have returned 1.6% year to date.
Price and Consensus: VUZI
Identiv: This Fremont, CA-based company offers RFID, Internet of Things (IoT) devices and IoT software platforms.
Identiv’s growing dominance in both RFID-enabled IoT and physical security businesses benefits top-line growth. In second-quarter 2023, the company shipped 44 million units of RFID-enabled IoT devices.
The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2023 loss has been steady at 23 cents per share over the past 30 days. Its shares have returned 16.7% year to date.
Price and Consensus: INVE
TransAct Technologies: This Zacks Rank #2 company offers software-driven technology and printing solutions for high-growth markets, including food service technology, point-of-sale automation and casino and gaming.
TransAct benefits from higher sales of AccuDate 9700 products. It also added 743 net new BOHA! terminals in the second quarter, bringing the total number of online terminals in the market up to 13,476.
The Zacks Consensus Estimate for TACT’s 2023 earnings has decreased 28% to 31 cents per share over the past 30 days. Its shares have returned 10.9% year to date.
Price and Consensus: TACT
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Vuzix Corporation (VUZI) : Free Stock Analysis Report
TransAct Technologies Incorporated (TACT) : Free Stock Analysis Report
Identiv, Inc. (INVE) : Free Stock Analysis Report
